Vermont Legislature SmartTranscripts:

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Good afternoon. This is the House Appropriations Committee. It's Tuesday, 04/14/2026. It's just after 01:00 in the afternoon, and we are here to take up the part two of the education bill. It's nine fifty five. It's come out of Ways and Means. And not to outdo House Ed, their amendment is about because it's quite a few pages longer than the original bill. So the plan for the afternoon is we are going to hear from the chair of House Ways and Means for just a quick overview of what they were trying And to then I think we'll have Julia go over the fiscal note. And we have attorney seers needed to answer those questions. We also have the treasurer's office coming in at two or 02:15 because there's stuff related to school construction, which is related to bonding. So they're going to come in. We're going to try to get all of our questions answered from all of these fabulous people in the room. And then we're going to take a break. We'll go off camera for half an hour, and people can call their friends, talk to each other, figure out what you want to do, and then we'll come back and vote. And that will be the day. I will let you know, because there is some capital bonding, there's going be a flyby through corrections institutions tomorrow. They're just going to take a look at it. But that doesn't affect what we're doing today. We're still on the same path that we're going to be on. So that is the plan. Chair Kornheiser, do you want to come up?

[Rep. Wayne Laroche (Member)]: Give us a brief

[Unidentified committee member (possibly Rep. Tiffany Bluemle)]: Welcome. Hi, thank you so much, Sosir.

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: Hi, I'm Mike Kornheiser, representative from Brattleboro, chair of the House Ways and Means Committee. Nice to see you all here again. I don't want to rehash everything I said at the Caucus of the Whole. So what I will say is the Ways and Means amendment takes the next step, probably the third year in a seven year process, to transform our education system to create more opportunities for kids and much more stable and very possibly much lower property tax bills for Vermonters. And so part of our amendment is deep in property tax law, really taking the next steps from work that we had the tax department do over the summer. We had a great collaboration with them. The language in those sections pretty closely mirrors everything that they were looking for for next steps. That feels very strong. There are and then the other aspects are the finance side and the spending side related to adjustments we needed to make in the timeline, ways we needed to shift things slightly to accommodate the CESAs. And then next steps for a lot of pieces that wrap around the foundation formula that were never anticipated to be part of the foundation formula. So that includes next step for studying transportation aid, next steps for studying special education aid, next steps for setting rules for reserves in a district, which are used very, very differently from community to community, and a few other details like that. Altogether, and one of the things that's challenging about this bill is it really only works when it's all together. So you asked a question on the floor, representative, about where the cost savings comes from. There are many ways in our education system that long term cost savings happen. But without the changes in property taxes and without the changes to the foundation formula, those cost savings are not realized by all Vermont tax payers. They are spread very unevenly throughout the state. And so the tax changes creates the fairness in the tax policy. The CESAs and the foundation formula create both cost savings and the capturing of that cost savings and spreads that out equitably and fairly across the state so that all kids can have opportunities. One of the things that I imagine will be quite challenging to you all and, is challenging to everyone, but you, I think, will be acutely aware of it, is very little in here happens next year. And so the fiscal note has a whole lot of very well articulated we don't know yet, not to bury the lead. And even some of the very tangible savings and the very tangible spending, like some of the spending that will be required for the regional assessment district changes, that is also out quite a few years and is expected to be spread out over six years. And even that, we're not sure on how much will be needed because it's sort of a greater less than of two numbers, and we don't know what one of those numbers will be. So this work is slow and careful, and we are trying to take into effect into consideration so many externalities. And that is how we need to do this work. But I think it's very uncomfortable for those of us who really want to compare the apples to the apples and say, what will be different next year? And that, unfortunately, is not quite possible at this time. But I think by the end of next year, very much will be. And I really look forward to having that conversation then once we have everything in place.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Yeah. You. Sure. All took in a lot of pieces, and we're going to hear more about them from Julia.

[Rep. Wayne Laroche (Member)]: Can I add

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Well, yes, go ahead?

[Unidentified committee member (possibly Rep. Thomas Stevens)]: This is just a very general question. I see signs that reduce the conversation to get rid of property taxes for schools. I know that

[John Gray (Office of Legislative Counsel)]: we have these at different

[Unidentified committee member (possibly Rep. Tiffany Bluemle)]: I can't quite hear you. I'm so sorry.

[Unidentified committee member (possibly Rep. Thomas Stevens)]: So I see the reduced the messages that are reduced to two or three words with respect to the whole transformation, and what's struck me as being very good about this process from the very beginning is that it's not a two year fix or a one year fix that you're seeking all of the different facets that may exist just by saying that taxation here may be different than taxation there. Do you find that people that you're working with, whether it's whoever the stakeholders are, which aren't necessarily upfront with the taxpayers who put the signs on their lawns, are understanding why it takes seven years to change the tax system in order to pay for education because people want to reduce it to just change it now. That's not happening and it's not going to happen, which I think is the right thing. But what kind of forces do you have to fend off or you have to explain to folks when you're talking about this?

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: So when we're working very closely with the tax department or listers or town assessors or school district business managers, I think everyone understands that we need to be operating at exactly the speed in order to do this well. When our property tax system, whether it's the homestead, non homestead status, which I think is confusing to almost everyone, or our very complicated system of property tax credits, I don't think the current system is understandable or tangible to most anyone. And so the speed with or slowness with which we would need to ease into a new system, I imagine, is also hard for people to get their heads around. But when the tax department was in to get some final tweaks to the language last week really lost around here. Last week, they used this term tax whiplash, which was actually exactly what I've been looking for, that unless we line up the changes in the foundation formula, the implementation of the CESAs, the changes to the property tax credit system, and the changes to the homestead, non homestead system all in the same year, we'll see this wild variation year over year for about four years. And so in we need to take exactly the amount of time that sort of the slowest piece of the puzzle is gonna take in order to be able to deliver to Vermonters both consistent educational opportunities, but also consistent and lower tax bills. And so that's a really important piece of how we laid out that timeline. Thank you for asking.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Other question, Woody?

[Rep. Wayne Laroche (Member)]: So, this is complicated. This is a huge thing. Bothers me that it's I like looking at something you already know. Systematic process. And I hear a lot of things, but I don't hear a lot of discussion. We're trying to control the costs. We know we're spending too much money compared to other states for education. We need to have better outcomes. We don't have good outcomes. That should be the goal. It should be the goal should be that we give the proper education to our children at the least cost we can to our citizens. Right? And and following down should that logic down through. And, like, the the school, you know, the construction part of this thing. I'm saying, well, wait a minute. There's a lot of we must have a bunch of districts where we don't need a school. We got we got a few that might, but why should they be the ones holding it up? Why couldn't we move forward with a chunk of it instead of trying to do everything at once? Why can't we parse this apart a little bit and try to get the easy things done or the things that would have the highest cost savings done in part, and then moving forward as we can through time.

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: So while I personally, and in my regular professional life outside of this role, think that educational outcomes are very important and very interesting. I have a lot to say about them. They have nothing to do with my work on ways and means in sort of the day to day basis. Right? We take the policy work to lead to educational outcomes from the education committee, and then we craft the tax structure around that. And I think House Education Committee would say, and I agree with them, that the next step in this bill is really going to take us one step closer to much better educational outcomes for kids. To answer your very specific question, the school construction is set up just like that in a staged way so that we can make Once we have advice from the school construction experts that are There's an advisory board and a division at AOE. Once we have that, then we can say, where are the most strategic building projects needed? Because what we don't want is for districts to be building on their own in order to shape what the future might look like. So if one district can pop up a building faster, they might win an arms race in their region for where the building is. And so we wanna make sure that it's strategic enough that we're looking out for the best interest of kids with that spending, rather than whatever district can move faster on that, while making sure that the decisions that have already made before we passed this law are not gonna hurt anyone who made those decisions because that's not fair because they didn't know about this future when they did that in the past. A lot

[Rep. Wayne Laroche (Member)]: of those runaway costs are in special education.

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: And that's what the CISA should make a really big difference on, 100 I actually, yes, I really firmly believe that. I'm

[Rep. Wayne Laroche (Member)]: skeptical, the point being is that, I mean, we have a federal law that says something. It doesn't say one on one. But we're headed towards one on one in a lot of the schools. There may be kids who are being misidentified and put into those categories because maybe they get behind. Could we address that without having to wait until the end?

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: So we actually addressed that in Acton, I'm getting a little ahead of my skis here, so But we did address that in 01/1973 a few years ago, and the implementation of that is still in process. One of the things that's interesting about special education law in particular is that every IEP is an individual contract with a family. So in order to change service delivery, every single one of those individual contracts needs to be renegotiated with every single family in order to change that. But I think if you look at the testimony that House Education took about the CISA in the state that's in the Southeast Vermont, you would hear some real improved delivery and decreased costs on special education in that area.

[Rep. Wayne Laroche (Member)]: I did look at some of the IEPs, and it was suggested that we could get with a FOIA request, we could get IEPs that would redact, so we couldn't tell who they were. Randomized samples to see whether or not those IEPs were effective.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: I have no idea, I'm sorry. So we're kind of getting out away from our conversation here, I see that Mike Mrowicki has a question. Sorry, go ahead, Mike. Thanks, can you hear me?

[Rep. Wayne Laroche (Member)]: Yes. Good.

[Rep. Michael Mrowicki (Member)]: I would like to say something about student outcomes here, and if it's not the time, I can wait till later. I think we need to put a hold on whether we assess how our kids are doing to the degree that we used to be very high ranked, and maybe we're not now, but I'm gonna be hesitant. And I wanna read from a press release from the Agency of Education, 02/27/2026. As part of preparing our system upgrades, the agency identified a coding error embedded in the original 2017 system design. The Agency of Education recognizes that discovery of a long time error affecting federal required designations may create confusion about Vermont's statewide accountability system. This goes on to say they're looking, they caught this, they're trying to fix it, but I think we need to take and pump the brakes on whether we're going to judge what the outcomes are for Vermont students right now.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Thanks, Mike. I don't think we have any comments, so thank you. All right. So if you're able to hang out for as long as you can, that's great. And I think we will

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: I think representative Canfield will enjoy it. He will enjoy it? Okay.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: If you need to raise back, you just go ahead. But I think if you want to stay here, that's great. May have some questions. So I think I've been discussing order with folks on the side. It looks like Kirby would be the first one to talk from Lunch Capital. Then Beth St. James can't be here till a little bit later. She's got parts of this. Great, we will just thank you, Julia. Julia will come in, fill in, and get through the pistol loan in pieces if we have to. We have the treasurer's office coming, so it's all an interesting dance this afternoon.

[Kirby (Office of Legislative Counsel)]: All right, welcome Good afternoon Kirby Keayan. Just so that you're acquainted with the attorneys who've worked on this, Beth and John and I, drafting has gone Beth has done education policy related things, which is the underlying bill and then the parts of education policy in the amendment that come first are Beth's parts. Minor in the middle, they relate to property classifications and regional assessment districts, the property valuation related stuff. And then at the end is the education finance related stuff that John has drafted. So that's kind of going in sequential order with the amendment except for skipping Beth.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Okay. So, well, Beth was here on Friday, and we went over the bill as it came out of House Education. So it would be great to have Beth here, but presumably, we've got most of our questions answered as it relates to that. So we really want to focus on the work that has been done by you all in the needs and needs. So what are we going to use? I have draft 4.2.

[Kirby (Office of Legislative Counsel)]: We can look at draft 4.2, the amendment itself, or we look at, we have a section by section summary that staff have prepared as of last night.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Is that different from the fiscal note?

[Kirby (Office of Legislative Counsel)]: Yes. Yep. It's different from the fiscal note.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: We don't have that.

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: We can

[Kirby (Office of Legislative Counsel)]: provide a So if you'd rather go through it in summary form, can do that, or I can go through the bill.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Do you have the section by section you can share the screen while we're getting copies? So this is on House Ways and Means website. You've got it? Okay. Give it a minute and refresh your pages.

[Unidentified committee member (possibly Rep. Tiffany Bluemle)]: Some of us are late copies.

[Kirby (Office of Legislative Counsel)]: Yes, things are happening fast. I think this was finalized around midnight last night.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Got Julia's note late last night too. So I know you all have had a very busy weekend. I appreciate that you're all still upright and mostly smiling and being here with us. So

[Kirby (Office of Legislative Counsel)]: do you want me to get started?

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Yeah, why don't you get started?

[Kirby (Office of Legislative Counsel)]: So section 30 of the amendments, we're jumping right in the middle, 30 out of 86 secondtions. Section 30 deals with the creation of regional assessment districts. It builds on the work that was started in act 73 last year. The approach for my sections was to repeal a lot of the stuff from Act 73 and just plunk it back in new. And then what ways and means is done with regional assessment and with classifications is to kind of build out the framework that was there in Act 73 and fill in some of the details to make this administrable for the state in the future.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Okay, so in the section by section it has all the best things first. So those are the first education policy pieces were sections one through 29 basically? Yes. Okay.

[Kirby (Office of Legislative Counsel)]: Then, okay. I would call out section 18 is changing the effective dates for Act 73. So that would be, that's in best sections, but that's one that's applicable throughout the entire amendment. So section 18 is one to be aware of. Have the timeline document that's available for you, but if you want to But if you want to see effective dates for themselves, section 18 is a good place to look. If you actually went back to Act 73 to look at effective dates, it wouldn't be helpful because those affected for being amended in this document. Okay.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: All right, so we'll search this section 30. Lynn, can you refer to pages? Oh, you've got

[Rep. Eileen "Lynn" Dickinson (Member)]: the summary. But if you're talking somewhat, Bill, can you give

[Kirby (Office of Legislative Counsel)]: don't have the pages in front of me, but I can tell you the section numbers. It's the best.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: If we start with section 30 Lynn, that's on page 29. So

[Kirby (Office of Legislative Counsel)]: in section 30, you'll see the establishment of regional assessment districts like I said, a lot of it is based off of what was an act 73 on regional assessment, but it's been flushed out further here. The effective date has been pushed back to 01/01/2031 for this, that's pushing it out a year.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Will you remind us what regional assessment are?

[Kirby (Office of Legislative Counsel)]: Yeah, there's so much groundwork delay.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: We haven't talked about that in this committee.

[Kirby (Office of Legislative Counsel)]: What it does is, so currently the way that we handle, for one thing, when you hear about regional assessment districts, you should think about math reappraisals for municipality.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: This is about grand lists.

[Kirby (Office of Legislative Counsel)]: It's about grand lists, about getting a value on the grand list to which tax needs to get applied for property taxes. The way the valuation process works now is every municipality is on its own to not only maintain its grand list from year to year, and then when it comes up to do a mastery appraisal, it's on its own to organize that and to have it done. We have a per parcel fee from the state to help pay for that, where we respond to receive some compensation for it, but it doesn't really match the full cost of these things. What regional assessment districts would do is we haven't gotten there yet, but in this language, the Department of Taxes would recognize boundaries for regional assessment districts, recommend those to the legislature and your session, you would actually set those boundaries. Those boundaries, the intent is to tie those to school districts. We don't know what that is yet. So there's a little bit of reason to wait for that. The idea is to have regional assessment districts that are made up of multiple school districts, municipalities that are able to contract together to have their mass reappraisal stuff. Under this language, under current law, technically a municipality requires to do it every six years. It's just not feasible in a lot of cases because of the cost and

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: There aren't a lot of assessors

[Kirby (Office of Legislative Counsel)]: is what I also would say. Yeah, the lack of economy of scale, it's hard for a small municipality to attract a third party assessor because they just not a lot in it for the assessing firm. So that's a big part of the problem this is trying to resolve. So under this in the long run, at 2031 really as this starts to incrementally roll out, you would have these regional assessment districts, they would have municipalities be able to jointly contract and have their mass reappraisal every six years done together. Along with that, there's language in here that is starting to flush out the appeals process. Currently, it's all municipality based, so appeals are handled by municipalities. Under this system, when it comes to the mass reappraisal once every six years, there would be a RAD appeals board or regional assessment district appeal board that would also have municipalities working together to handle valuation appeals, specifically from the mastery appraisals. The year to year adjustments that are done for property valuation would still be handled by municipalities individually, and those appeals would also be handled by municipality individually. But when it comes to mastery appraisals, we'll have the RAD system, and then we'll have the RAD appeals boards. PVR's role in this, that's property valuation review, the division of the Department of Taxes that handles property valuation and property issues, would have a role in providing guidance and technical assistance and kind of working out some of the logistical parts. But a lot of logistical parts are going to be handled by the municipalities within a RAD working together. So that's pinned out of view of the RADs. And I can just move on from that. So section 31 is a conforming change to remove some of the current law provisions relating to reappraisals because of provisions are being replaced by the RAD system. Section 32 is a clarifying provision that clarifies that for the purpose of an equalization study municipalities within a RAD will be treated as a single entity. You probably are aware that property valuation and review every year does equalization study and that study is to assess how valuation is being done for municipality municipality, and that's through that, following a statutory formula is how CLAs are applied to the equalization study, and something called the coefficient of dispersion. And the whole idea is for one to record a bunch of information about our grand lists and valuations, but also those are used to try to make sure that when we go to apply education property tax, that it's apples to apples. That's why it's called equalization. We're trying to equalize the grand lists between municipalities.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: So would this Regional Assessment District approach minimize the swings in CLAs?

[John Gray (Office of Legislative Counsel)]: A big

[Kirby (Office of Legislative Counsel)]: part of it is that if this is successful and this can get the reappraisal schedules consistently for every municipality done every six years, that means there won't be large gaps, and that means that the grant list will be more accurate year to year. And being more accurate year to year means the CLEs will be closer to being accurate.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: We have 78% of CLA or 115%. That's the goal.

[Kirby (Office of Legislative Counsel)]: Being close to 100 means you're close to actually being accurate to the fair market value, means that the system won't, the equalization system won't adjust you very much. So school districts could rely more on the actual values they have on the ground list when performing budgets. You're aware, sometimes people are upset because they think that the landscape is one thing, CLA gets applied and they're woah, woah, woah, what the CLA ruined our day. It's like, that's not really what happened. It was just that their information previously wasn't accurate. So yes, to keep things closer to accurate and to it easier. So section 32, I think I said that about the causation study, section 33 moves the statute on PVR valuations of public utilities. PVR has taken on some of the valuation responsibilities for tricky areas, public utilities is one, currently that statutes located in the appeals chapter, but because of the RAD appeals boards, the property valuation appeals chapter, that chapter is actually being repealed here and it's being replaced with language that works for rats. But since puppy utility set the statute is located in that chapter, we had to move it. So if there's no change in the law, it's just a moving.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Yeah,

[Kirby (Office of Legislative Counsel)]: it's a moving of that to a more appropriate place. Section 34 has some repeals. The first repeals are the sections of Act 73 related to RADS because they're being replaced, including the transition language, which we'll get to in a minute. And then sub B of that section repeals the statutory chapter on property valuation appeals, which I was just talking about, but that again, it's being adapted to RADS and it's being moved to a new location. Section 35 creates a new way to compensate municipalities for the costs of mass property reappraisals. So this section would, I mentioned earlier that under current law, the state helps pay for mass reappraisals by using a per parcel fee, that is the number of parcels within the municipality, they get an amount of money equal to the parcels multiplied by $8.5 a year. What this would do is it would actually keep that $8.5 per parcel fee in place, but that would be to compensate for grand list maintenance between reappraisal years. And so the reappraisal are taken out of it, are the significant cost, and that's being paid for through the Department of Taxes to help pay for a reappraisal that's upcoming, they would pay either $66 per parcel or two thirds of the estimated cost of the reappraisal, whichever is lesser.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Lesser, okay. And not every assessment district would be evaluated in the same year. So it isn't like the whole state that's The gone across the

[Kirby (Office of Legislative Counsel)]: vision here is that one sixth of the municipalities would be doing it per year more or less. So it wouldn't be the full cost of $66 per parcel every year, it would be $66 per parcel for one sixth of municipalities every year. Section 36, I would like to flag the effective date. It's a tricky one because as drafted it was effective for 07/01/2026, but that's because the language ties it to payment for reappraisals under the RAD system. So in hindsight looking at it probably should have made that effective along with the RAD system, but legally speaking it makes no difference. Section 36 is a deleted section. This is at one point, the language created a new tax department position to handle the RAD appeals. This is gonna be a hearing officer that handled just regional assessment district valuation appeals. This position wasn't going to be needed for some years to come. As you can see, there's a long timeline here, so it was removed. And it's not a need that has gone away, but it's not a need that's in the immediate future. Sections 37 through 52 are conforming changes relating to the repeal of the valuation appeals chapter and the moving of it to the RATS sub chapter. There's 15 different places in statute where valuation appeals are cited and cross referenced. And so we're just changing all those cross references. Section 54 is the report from the Department of Taxes relating to regional assessment district boundaries. That report will happen under this language on 12/15/2029. That is after some of the dust has settled when it comes to the setting of the foundation formula and possibly setting up new school districts. Because I think Beth would have gone over with you this 11/07/2028 state. Does that ring a bell or is that a John?

[Rep. Wayne Laroche (Member)]: We won't remember. Doesn't yeah.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: We don't know. We don't know.

[John Gray (Office of Legislative Counsel)]: It is Beth. Alright.

[Kirby (Office of Legislative Counsel)]: So those things are all tied together. That's why there's three attorneys working on this, because some of this stuff just can't be separated. Section 55 creates a process to allow them to be reimbursed for abated education property taxes. This is a not intricately related to anything else. This is just a valuation related changes being made. This is for the short term. This is not part of the greater vision of everything else in here. But essentially there's a section allowing for the state to reimburse municipalities in very rare cases, relatively rare cases where they've abated education property tax for an individual taxpayer based on a clear error or mistake probably made by the town itself in doing the valuation. In cases where that is corrected, the state will allow education patent to be abated also, and we'll pay the municipality back for that abatement. So are there any questions about that? Okay, section 56 is another one of these one off things. This requires PVR to issue guidance relating to the valuation of manufactured home parks and limited equity cooperatives, it's effective on passage. It's an area of concern for some people about how evaluations done for these. So it's asking PPR to put some guidance out there so that it's done more consistently throughout the state. And that's it with RACS. Section 57, you start to enter into the property tax classifications changes. The 10,000 foot view here is that around 2029, Vermont will start transitioning to have a currently in the current law, we have two tax classifications, homesteads and non homesteads. This would transition Vermont to having homestead, non homestead, non residential, and non homestead residential as the three classifications. And under Act 73, there are tax rate multipliers that could apply so that the effective tax rates could be adjusted for each classification. One thing you should know is that the way that this is put together, the homestead classification as you know it stays the same. Anything that's a homestead right now is to be a homestead. And the way that the system works when it relates to homesteads stays the same. For example, under current law, if you have a business use of a part of your house, this is your homestead, the portion that's a business use would be taxed as a non homestead under current law based on the floor space, but the land and everything else associated with that homestead is taxed still as homestead. That treatment would stay the same. Any treatment we have for homestead right now would stay the same. The changes here though, are for what we consider non homestead right now. So what we consider non homestead right now would be divided into two categories, and those categories are based off of dwelling units, and how those dwelling units are used. It's assumed that the non homestead residential classification will be the one with a higher tax rate multiplier, which will have the higher taxes. The way a property would fall into that classification would be that there's a dwelling unit, that dwelling unit is not used as a homestead, that dwelling unit is not used as a long term rental, that dwelling unit should we go that dwelling unit is fit for year round habitation, it's not a mobile home, and after all of that also it's not being used for employee housing. So after all of those parts of the definitions are met and it's still a dwelling unit, it's being used essentially what this is trying to narrow it down to is, is it being used as a second home or is it being used as a short term rental, or is it just being unused in general, but it could be, that would be when the higher rate applies. That's what the definitions are trying to narrow it down to. Anything else that's non homestead would be non homestead, non residential, and it would presumably have a lower rate than the second house.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Second home. So an apartment building would be a non homestead residential because it's a business. Somebody owns the building and is renting out and that's their business.

[Kirby (Office of Legislative Counsel)]: And all the dwelling units there would be used for long term rentals which would put them in the non homestead.

[John Gray (Office of Legislative Counsel)]: Right, they're

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: all being used for short term rentals. They would non resident, non homestead residential.

[Kirby (Office of Legislative Counsel)]: And so the administration of this has been very tricky and the Department of Taxes issued a report that was required under Act 73, they did that going into this session, and that report was the basis for fleshing out a lot of the details here. So a lot of the administrative details are what are being flushed out for the first time. And those administrative details are essentially, lost my train of thought. The first part is with assessing officials and only role, building new role assessing officials will have at the municipal level is to identify the number of dwelling units for each property. So that's one piece of information that's being used to administer this. The other place where information is being gathered is dwelling use attestation, which is a new form that would be submitted to the Department of Taxes, much like the Homestead declaration, and if that form is not filed and a Homestead declaration is also not filed for a parcel, the way this is put together is that the highest rate would apply. So for property owners who know that the highest rate is going to apply to them, they don't actually have a final requirement, they'll just have that applied. But a dwelling use attestation would be necessary for business properties that maybe have, it would be the apartments, it would be the ones that have dwelling units potentially that actually qualifies as non homestead, non residential. So they would file a dwelling use attestation to make sure they don't get the highest rate is more or less how it says. Those two businesses It's

[Julia Richter (Joint Fiscal Office)]: an incentive

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: to do that.

[Kirby (Office of Legislative Counsel)]: Yes, and so it does create a new filing requirement for some property owners. The tax submitted this report, and they thought that approach like this is the best that they could administer. So that's the approach being taken.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Okay, Dave, did you have a question?

[Rep. David Yacovone (Member)]: Yes, well, can you explain to me any differences between, say, a ski resort with a large complex of, I'll use the word condominiums, units. The treatment of an entity like that versus a small apartment house with three units in a street in

[Kirby (Office of Legislative Counsel)]: the village? I'll start with the apartment house. So a long term rental is defined as renting it out for periods of at least thirty days,

[John Gray (Office of Legislative Counsel)]: total at least six months in the year. How many?

[Kirby (Office of Legislative Counsel)]: So the rental period needs to be at least thirty days, so you're at least renting it by the month, and then for six months total, so at least half the year. So if a dwelling unit is being rented in that way or more than that, then that unit would be considered non homestead, non residential. In very niche situations, we have a definition of a dwelling unit that's based off of certain characteristics about it, including the ingress and egress and things like that. So sometimes units will be eliminated from the non homestead residential characterization because the dwelling units don't qualify also. Just wanted to footnote that, but that's like way in the weeds. So the beginning of your question starts with that. So I think the apartment in town is probably going to fall into that and be considered non homestead non residential. The resort depending, it just depends on the nature of the circumstances, the definitions would have to be applied. If these are long term rentals though, and with the resort properties, then they could be classified as non homestead, non residential. If they tend to be short term rentals, they could end up qualifying as non homestead residential, if it's like a short term rent situation, But if it's more like a hotel situation, that's when you get into the other weeds of the definitions I was talking about with ingress and egress and all of that. But the idea is that hotels will not be considered short term rentals.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Hotels are a business, but if you own a condo at Spruce Peak in Stowe, if you lived there all year round, it probably would be your primary homestead if you lived in your condo at Spruce Peak. Yes. If you rent it out because you put it on Airbnb or VR, then it's a non homestead residential because it's a short term rental.

[John Gray (Office of Legislative Counsel)]: Yes. Well, it could be. Thank you. Different.

[Kirby (Office of Legislative Counsel)]: It's, but they're only there.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: But it's a second home.

[Scott Baker (Director of Debt Management, Office of the State Treasurer)]: It's a second home.

[Kirby (Office of Legislative Counsel)]: Right. So there's a very, you can see there's very much a use based component, and that's why the dwelling use attestation is important. That information is primarily going to be gathered by the property owner themselves submitting how they're using the property. It's very similar to the homestead declaration in that way.

[Rep. Eileen "Lynn" Dickinson (Member)]: You wanna know what they best. If you are a skier and they have a bunch of condominiums that they're using essentially through their central booking, like the JPeak, they have lots of condominiums that are owned by individuals all over the place, but they don't rent it themselves. Rent it through the

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: The property manager who's doing

[Rep. Eileen "Lynn" Dickinson (Member)]: Jay Veth is the property manager. So the issue is that you really don't Sometimes they're occupied, sometimes they're not, sometimes it's every week, sometimes someone on the weekends. It's really like a hotel. There are conned hotels. But who owns the property? It's owned by somebody who owns that particular unit, but they're not managing. And that's okay.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Don't think So that matters,

[Rep. Eileen "Lynn" Dickinson (Member)]: is that a hotel or is that How does that function? Who's doing the booking? Short term rental, right?

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: We'll let the lawyer answer the question.

[Kirby (Office of Legislative Counsel)]: I don't know if I followed all of your details. And I think that's the important thing is that the owner will file the dwelling necessitation. Right? So if you are a renter of a condo unit order, it's the owner. So it matters whether each unit is owned individually, or if there's one owner of the entire complex, right, that's gonna matter. But the owner would submit the dwelling use attestation, and for every unit they would give the amount of floor space used and for what use it is. If they qualify as long term rental for some of them, because you're gonna have a situation and it has to be accounted for. So we're going to wait in the weeds on this, but that's okay. You could have a building that has some of those units are long term rentals, some of those units are short term rentals. The way that our language here accounts for that is you would take the total floor space of the building, for all those that are long term, they get the non homestead, non residential classification, for those that are short term, they would get the non homestead residential classification, and then the the proportion of floor space used for the entire building depends on how taxes apply. So if it's 60% of floor spaces is long term rental, 40% is short term rental, then that's how we put on the grand list. And so for 60% of the value, you would get the lower rate and for 40% of the value, you get the higher rate in that case.

[Rep. Eileen "Lynn" Dickinson (Member)]: Okay, now there is a tax law that says that as an owner of one of these places, you can't write off or use it as a business if you stay there more than two weeks. If you buy a condo and you tend to rent it out as often as you can, I mean, maybe you don't do it all the time, but it's often as you can, and you write everything off because it's a business, an LLC is like, with or without the LLC? But if you stay there more than two weeks, then the federal government will not let you do that write off. It has to be a limited amount of time you're allowed to stay there. Now, how does that conflict with this?

[Kirby (Office of Legislative Counsel)]: I mean, it doesn't anything to do with it. I guess what I'm hearing from you is that for federal income tax purposes, you might have an incentive not to stay there. Wouldn't But affect your use in any other way. If you own a unit and you're basically doing short term rentals with it, you stay there sometimes, that wouldn't affect the classification. In fact, if it was a long term rental, and let's say you rent it out for eight months in a year to one tenant for an eight month period, and you stay there for four of the months, that would fall, it would still be classified as non homestead, non residential. You wouldn't get the second home rate in that case. It would be considered a long term rental.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: So I think we are getting a little too far in the weeds on this now. And if you've got I mean, there's a sort of a joke about flashcards and waste I don't do have flashcards. So I've got all of these questions and more that we haven't thought

[Julia Richter (Joint Fiscal Office)]: of have been asked in

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: these meetings. The point is that we're going to have a second home tax classification, defined as we've defined it here. So that's part of what's going on here. Let's continue.

[Kirby (Office of Legislative Counsel)]: Yeah, and I would say that the picture, compared with Act 73, the picture is clearer under this language about how exactly this is gonna work. Section 60 has transition provisions. During calendar year 2029, the Department of Texas is going have to gather information like the dwelling use attestation type information we're talking about in order to implement the system in 2030, the next year. There are contingencies here as a reminder, both the RADS and the classifications have many of the same contingencies as the foundation formula. Section 61 repeal several sections from actually relating to property tax classifications because those are being replaced very similar to what is going on with RADS. Section 62 is an intent section that says that it's the general assembly's intent that the tax classification system will be reevaluated whenever the general assembly sets tax rate multipliers, because that is the big open piece that's still to be done on classifications right now. Section 63 is a perspective repeal of the main sections. If the new tax rate multipliers are not set by 07/01/2030. And the last part is section 64, which amends the current definition of homestead to make sure that a lot of the treatment that's happening under classifications is kind of belt and suspend or repeated in the homestead definition to avoid any ambiguity about whether homestead is to be treated any differently. And the goal is for it to not be.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Is it for me? It instruction too or you're not?

[Kirby (Office of Legislative Counsel)]: I am not. Okay. So

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: if you're able to stay, that would be great. And this is John. So perfect, because then we'll have the treasurer's office come in and talk to us about the other part of this from their perspective. So that works well.

[John Gray (Office of Legislative Counsel)]: John Gray, office of legislative council. Let me find one of the many emails I have that contains

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: Your calendar.

[John Gray (Office of Legislative Counsel)]: Yeah. I I had, like, just a ton of windows open. That was one of them, so it should be

[Rep. Wayne Laroche (Member)]: Are we moving to a different document? It's you still using

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: the section by section?

[Rep. Wayne Laroche (Member)]: We can

[John Gray (Office of Legislative Counsel)]: still use that if you

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Oh, you're using it.

[John Gray (Office of Legislative Counsel)]: Prefer. Yeah. Think that

[Rep. Wayne Laroche (Member)]: is working for people. Thank you.

[John Gray (Office of Legislative Counsel)]: Is this a charger?

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Do you have a charger somewhere? Yeah. We've learned that you all are so busy. Thank you very much.

[John Gray (Office of Legislative Counsel)]: My laptop is struggling, so

[Rep. Wayne Laroche (Member)]: should be back to life now.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Okay.

[Rep. Wayne Laroche (Member)]: Going to

[John Gray (Office of Legislative Counsel)]: bring a chair, and I'll try to zoom in so this is a bit better. Great. So my second start with section 65, which if you are looking at the text of the bill itself, again on page 74, but I will be sticking with the section by section for now. My sets of sections relate primarily to school construction, but they also touch some of the transition measures from x 70 e three for the end. I try to go sort of quickly if possible, just knowing the 02:00 piece. So broadly for orientation purposes, oftentimes we call also for intent language, but I think understanding these sets of sections is actually very helpful to look at the intent language here. So section 65 is expressing the intent general assembly in H95 for the updates to the school construction sections. And I've called out two particular pieces here in the section by section summary that I think are nice for laying out the timeline. In the short term, the legislature's intent is to catalyze the program by providing state aid in the form of an additional $50,000,000 annually in state bonding capacity to support school construction. You're going to hear about this. This is just intent language at this point.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Right. There's language We're not committed and if we vote on yes on this bill, we are not committing to $50,000,000 in school construction. There's a lot that has to be done. But this is like in the ideal world where we can do that and it makes sense, that's what we would like to do. And

[John Gray (Office of Legislative Counsel)]: we'll see if, well, we won't see the text, but there's a provision later on to get a recommendation from the treasurer in consultation with CDAC on what that appropriate annual bonding capacity level should be. That's short term, provide this additional $50,000,000 annually in state bonding. In the long term, provide state aid in the form of a debt service subsidy to school districts. That's the kind of aid that was provided to next 73 last year or set out in next 73 last year, it's not effective yet. And these would go effective 07/01/2026. Section 66 is speaking to the staffing levels for the school construction division of the AOE. Among the many reports that AOE was tasked with producing under act 73, they were required to come back with some requests. Included among these was staffing for the school construction division, and that's what you see set out here. Authorizes four permanent classified positions to staff the school construction division. It does not contain any appropriation and factors.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: We've authorized the positions but not the money. Are the positions in the budget too? Sort of looking at chair point here. These aren't in the budget, are they? Have four positions. Think they are.

[John Gray (Office of Legislative Counsel)]: And the request in subsection B of this section, which you can't see is to have AOE submit as part of its FY twenty eight budget appropriate funding levels for these positions.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Okay, so you're not dealing with it in this budget. Okay,

[Rep. Wayne Laroche (Member)]: thank you.

[John Gray (Office of Legislative Counsel)]: Section 67 is giving some specificity to the delegation of rulemaking authority to the agency of education. Under Act 73, they're granted rulemaking powers. You'll know that the existing program, while under moratorium, has the state board of education with rulemaking authority. Act 73 changed so that AOE has that rulemaking authority, and this specific section, section 67, requires AOE to adopt rules on school construction by 03/31/2027. It's worth noting they will have had transferred to them the state board tool. So they're not starting from a. And specifically, they would need to include rules to address prioritization and bonus incentives that align with the goals of this bill, and then also how to treat outstanding capital indebtedness as of 12/31/2025. So, broad rulemaking authority, that authority already exists, but this is specifying two particular sets of rules that need to happen and imposing a deadline. Section 68 is, you may recall that act 73 stood up an advisory board to assist with the rollout of state aid program. Unlike the other provisions of the state aid program that go effective this summer, that advisory board already exists. There's already been one report that came in December, I believe. This is a section that tasks that advisory board with providing a report to the general assembly by the end of this year, so 12/01/2026, that identifies opportunities for school construction, that support the consolidation of school governance structures and improve access to educational opportunities for public school students. If you are looking at the text of the bill, you're gonna see that call out to consolidation of school governance structures and improved access for educational opportunities a number of times throughout, and that's the generic call out to the goals of the act. So this is trying to tie, report, intent, all of these pieces to the goals. So advisory board needs to identify opportunities for school construction that align with that goal. For each opportunity, provide a citing study that would include location and cost and the like, and then evaluate statewide scenarios for pursuing multiple opportunities. You could imagine the advisory board identifying different opportunities, not all of which are consistent with each other. Maybe geographic proximity would mean that this school can't work with that school. And so the last piece here is saying consider these holistically as a statewide scenario, what would be the avenue for pursuing multiple offices?

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: So just, and I see you, Lynn, just a quick question and I may have missed it. So does this advisory board exist now?

[John Gray (Office of Legislative Counsel)]: Yes, it did.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: When did we create it?

[John Gray (Office of Legislative Counsel)]: Back in Act 73

[Unidentified committee member (possibly Rep. Tiffany Bluemle)]: last year.

[Rep. Wayne Laroche (Member)]: Last

[John Gray (Office of Legislative Counsel)]: year. The one There

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: are actual names associated with this board of this file? Yes. I don't see

[John Gray (Office of Legislative Counsel)]: that yet.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: I'll go in more of that. Go ahead, Lara.

[Rep. Eileen "Lynn" Dickinson (Member)]: When I read Act 76 last year, last summer, it appeared to me that this was going to be a change from what we've had in the past. You had a community decide or a school district decide they want to build a building or add an ongoing building or whatever. It went to the public, they had hearings, they went out a pawnboat, they got the pawnboat passed by the community, and then they just went to the bond bank or whatever you go to to get started, get plans and The all way I read it is this advisory board functions more like a CLN process that we have where in you have to present your plan. And I can't remember if it's voted first or afterwards. But the point of it is you have to go and plan for what you want to do. Go to this advisory board or some other kind of entity to go, and they prioritize which are the most Maybe like the transportation committee does. You prioritize them based on needs. Some may not get any authority to do it. Sure. And some may say yes, but you've got to also do it with the school over here or if you don't believe And is that what this now says?

[John Gray (Office of Legislative Counsel)]: So the simple question to this is that this is purely for the availability of state aid. So districts are free to pursue school construction projects, but if you want to receive aid, you need to meet the eligibility conditions, you need to be prioritized to get first access to funds, and that would include the advisory board's advice on what the particular correct projects to appropriate are. If there's a process envisioned for annual budget submission that would include the projects that should be prioritized subject to rulemaking. So I wouldn't say that this changes anything about the way that school districts can pursue school construction projects, but if they want to avail themselves of state aid, they will need to go through this process. And I think part of what you're identifying is that this has been under moratorium for many, twenty years effectively. So it would change the process that folks have for pursuing school construction, but that's really just the way that a process would change by picking online any state aid provisions with eligibility conditions, regardless of the particular structure that's done here. Does that

[Rep. Eileen "Lynn" Dickinson (Member)]: help? Yeah, so most I'm working with the theory most school districts or whatever would probably not proceed without the state aid, aid.

[John Gray (Office of Legislative Counsel)]: Yes, and so high level, the way to think about it is it's Act 73, this bill are recognizing limited funds available, direct state funds to projects that align with explicit goals such as stated in intent language, both in Act 73 and here, and also in the rulemaking that AOE will do, including those rules we just talked about, which try to draw in the same intent for consolidation of school governance structures and improved educational access. Yeah, but prior to the moratorium, when we did have school aid construction,

[Rep. Eileen "Lynn" Dickinson (Member)]: there was no requirement for you. Once you started and got the project going, you got on a list

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: and

[Rep. Eileen "Lynn" Dickinson (Member)]: you're going to

[John Gray (Office of Legislative Counsel)]: have to do a long waiting list in the end. You are correct.

[Rep. Eileen "Lynn" Dickinson (Member)]: You prior have to get authorization to start. They were able to just go ahead and do it.

[John Gray (Office of Legislative Counsel)]: The prioritization now is different. Yes, I think that's the

[Rep. Eileen "Lynn" Dickinson (Member)]: Just wanna double check. Let's keep going.

[John Gray (Office of Legislative Counsel)]: Section 69 is jumping into amending the state aid for school construction chapter title 16. And this is just including in the statement of policy, is kind of a general intent section for the chapter, exactly the things that we're talking about. State aid program is the legislature is expressing intent to prioritize school structure projects that align with the creation of these school government structures and leverage that additional state bonding capacity to support those projects. Unless you think that intent language has no effect at all, I would note that in this state aid chapter, some of the intent pieces are pulled into the way that rulemaking is done. So it's factored into the way that rulemaking is, one of the cabineting of discretion. Section 70 is just clarifying that the AOE's annual school construction funding request must include any requests for projects for funding through state funding, that's implicit in the things we've talked about before, and also in some sections that come later. Section 71 clarifies that the state aid for school construction advisory board shall have the assistance of the school construction division at AOE and the program director of that division, and it cleans up a time limited provision that's now passed. So there was a report that was due the end of last year struck for one of its purposes. Section 72, this is your big section to pay attention to, 16 PSA thirty four forty five, every time I talk about this, call it the kind of core state aid provision. This sets up the application process and the award of construction aid. And so section 72 amends the statute that governs that application and approval process to, we talked about this first bullet, require AOE to identify those projects that would be supported by state bonding. And then it sets up a process for legislative appropriation or the beginning of that process, require the house committees on education and on ways and means and their senate counterparts to recommend a total school construction appropriation. It amends the award provisions. You may recall from last year that the award provisions were in the form of a debt service subsidy model that ranged from 20 to 40% of eligible debt service costs. Now what's being contemplated is, or what you see in this bill is eight of 50 to 95% of the total approved cost of the project, and it could be in multiple forms. It could be debt service subsidy, support for state bonding, or it could be a combination of both of those.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: So when we say debt service subsidy, just to be clear, is that just paying the interest on the bond, or is it actually paying some of the principal as

[John Gray (Office of Legislative Counsel)]: Paying some of principal. Yep. So the idea is that locally, the authorization would

[Rep. Wayne Laroche (Member)]: for the

[John Gray (Office of Legislative Counsel)]: probate, and the state kicks in aid to cover a specified percentage of the full depth of its costs each year, which would be your principal and interest. So it could be a substantial portion depending on the way you're awarded. But yes, it's not just interest.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Wow, because I was the school board chair when we did one of our very last, the last ones at my elementary school before school construction, went. The maximum was 30% then.

[John Gray (Office of Legislative Counsel)]: It was 30% for some Yeah.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Something you had to bond from the rest of it. Yeah.

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: You wanna explain, Chair. Yeah, so under the foundation formula, it's a very specific amount of money that is very specifically calibrated to cover day to day educational costs of the school and very specific anything across the school. I gave sort

[Julia Richter (Joint Fiscal Office)]: of some of the things that

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: are not included in it, but one of them is bonding debts, school construction costs. In order to have the foundation formula retain the equity that is built into it, we capped spending above that at a very, very low amount at 5%. And so the traditional way that we've done school construction and then had school debt be carried as part of the school budget just absolutely doesn't work under this new financing mechanism because districts don't have permission to essentially raise those funds on their own. And so this system is a way, one, given that even when a district does that by themselves under current law, all the rest of us are carrying that cost. This mechanism recognizes that and seeks to better control those choices to meet our overall state policy goals while recognizing that we won't be very, careful with how we cover that debt, given that regardless of how it's raised, regardless of how it's decided, it's always a statewide debt even though their current policy is not.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Right, so the control is sort of on the front end of who gets the money and whose project gets approved, because we don't need three high schools within five miles of each other.

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: And there's no mechanism other than this in the future law to cover those kinds of debts.

[Rep. Eileen "Lynn" Dickinson (Member)]: Okay, thank you.

[John Gray (Office of Legislative Counsel)]: The next piece is something that was foreshadowed earlier. We talked about the intent language of that 50,000,000 additional. Before final vote, there had been a similar provision at this application section to set out what the caps on that service subsidy and what the cap on that annual state bonding capacity support would be. And what you see here is requiring the treasury consultation with CDEC to recommend that annual total state bonding support and the annual debt service subsidies to be awarded. This section also amends the sequencing of bond authorization application approval. You can think about this as a natural consequence of providing bonding support. The consequence of that is you don't know what to vote locally, so you know what your state award is if your award is gonna include any form of state bond, because you would need to reduce the overall vote on the bond. Otherwise, you would be supporting a bond for the bond, just not the proposal. So this section also mentions the sequencing of bond authorization and application approval so that a district knows it's awarded in advanced bonding. And lastly, it clarifies that existing prevailing wage requirements under both state and federal law for contracts awarded for school construction receiving state aid would apply. They're already independent existing law. Section 73, you may recall that the state aid for school construction program, which has been under

[Rep. Eileen "Lynn" Dickinson (Member)]: moratorium Let me go back just a second. So the state's going to subsidize some of your bond obligations. Did I just hear you correctly that you have to know how much the state is going to come in and put down for that particular bonding situation for the school? And then you can go to the voters to ask them for the remainder.

[John Gray (Office of Legislative Counsel)]: Yes, so

[Rep. Eileen "Lynn" Dickinson (Member)]: And then you will pay that out of your own funds, because the state has already subsidized the statewide funds similar to what we have now.

[John Gray (Office of Legislative Counsel)]: So it is like the way that it works now and that this would come online 07/01/2020. These are effective 07/01/2026. And so the current method of voting your bonds for school construction and then those costs count toward education spending and are are are are raised statewide. Right? Although your district increases in per pupil spending as a consequence of that vote because you'd have to cover the annual debt service costs. That mechanism is not disrupted by this provision. What's done here is because some of your aid could come in the form of state bonding, which would necessarily reduce the amount that you need to bond. You can't vote the bond until you actually know what that state aid provision will be. So it complicates the sequencing, and there are definitely some questions as to how that

[Rep. Wayne Laroche (Member)]: should be.

[Rep. Eileen "Lynn" Dickinson (Member)]: So the state's going to bond $100,000,000 for school construction based on the priority list. They've decided that we put that in the budget. Is that correct? And so they'll live behind, they'll distribute it out based on their priority list. And then if you have a gap as town A or school district A, you have to bond whatever's left over. Is that correct?

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: Okay. Maybe another way of describing it that might be helpful is every district is gonna have a capital stack they need to put together in a fund for construction. That capital stack will be made up of a few things. One of those things is the money that's given from state held bond. Some of that is the district held bond, which is then covered through a combination of state grants, essentially, if you cover that debt and then locally raised funds, which are a secondary supplemental district spending method itself. So in the most basic capital stack, it will be covered through those three banks, state bonds, grants from the state to cover local debt, and locally raised supplemental district spending as a separate kind of new metric for supplemental district spending.

[Scott Baker (Director of Debt Management, Office of the State Treasurer)]: We

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: also anticipate some degree of public private partnerships, which could be sort of a fourth piece of the stack, but that's more complicated than we need to get into grant.

[Rep. Eileen "Lynn" Dickinson (Member)]: Okay, so the number three one, which is your state, your local piece, is that part of that 5% or your

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: No, we actually No, and John.

[Rep. Eileen "Lynn" Dickinson (Member)]: You it to the 5%.

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: Okay. It's

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: not like the old thing about Bob. It's a whole new one.

[Rep. Eileen "Lynn" Dickinson (Member)]: And you have to add on, okay.

[John Gray (Office of Legislative Counsel)]: Okay, let's continue. That explanation is perfect. So section 73, you may know that the existing state aid program has a prohibition on extending state aid to projects the need for which results from significant deferred maintenance that might preclude aid to a vast portion of the school facilities portfolio. So this section 73 repeals that prohibition on state aid for those kinds of projects. Section 74 is a legacy debt aid provision. This is the creation of a new section. It makes available annual aid of up to $61,000,000, which would be subject to appropriation for those purposes for 100% of the debt service cost, any debt that is incurred by a school district for cost related to facility construction and renovation as of 12/31/2025. I'm gonna pause and go through each of the factors. So 100% coverage for legacy debt, and the idea is what kicks in as that kind of debt, you're getting 100% for the debt service costs, and it's on debt related to facility construction and renovation. The intent is a broader call out than capital indebtedness might conceivably capture the same thing, but there was some concern that perhaps planning and things that necessarily accompany capital construction might not be grouped in. So a 100% coverage for debt that relates to essentially school construction that exists for a school district as of 12/31/2025. So there's a time piece, there's a content piece, and then it's a 100% age.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: So it's stuff that schools that were doing before they knew that we were gonna be doing this stuff.

[Kirby (Office of Legislative Counsel)]: Exactly.

[Beth St. James (Office of Legislative Counsel)]: And so we were trying

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: to do a hold harmless, more or less.

[John Gray (Office of Legislative Counsel)]: It's kind of a trying to clear the slate is the way that I think of it moving into a new

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: And is 61,000,000 coming from the general fund?

[John Gray (Office of Legislative Counsel)]: So the source of this funding is not resolved.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: It's the ed fund is the default and is 61,000,000 in total of all the what we expect people are going to ask for legacy debt, you sort of added it all up and that's what it came up to?

[John Gray (Office of Legislative Counsel)]: It is the worst year as I understand. It's the highest year as I understand for debt service costs.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Okay, so it's based on actual data that you have somewhere.

[John Gray (Office of Legislative Counsel)]: Thank you. Section seventy five and seventy six, don't think we have to spend too much time. This is kind of a non substantive provision, just makes clear that your education payment will include a host of things, including your school construction aid. You're just gonna be grouped together. So under your current funding formula, would include Ed spending grants and also your construction aid in the future would include EOP, SDS, and this construction aid. And it's hit twice because we have to amend it now and when the foundation formal rolls out, submit continuously for meth. Section 77, we just talked about this piece. The supplemental strict spending cap of 5% that you know from Act 73 does not apply to school construction expenditures, so there's no restriction on that piece other than the practical question of whether you can finance it at the rates that you have, which is a standard reality everyone has to confront under any formula. Section 78 amends the form of the school budget ballot. There was a question that came up in ways and means as to if someone might, a district might vote upon in a particular year and then not in subsequent years authorized supplemental strict spending to cover the debt service costs. I will just say that that's a same situation that exists in the current situation where you approve a bond, and then you have to include it in your ad spending each year. But what's proposed what's included in September is new ballot language that would say you only submit supplemental district spending to cover those ongoing annual costs for test service costs for school construction at the initial authorization of the bond, and then it provides two ballots for clarity, one for that initial incurrence of the bond and one for sort of regular SBS. I can be quick through the remainder. Alright. These are foundation form of transition measures. Section 79 repeals transition measures in x 73 not for substantive reasons, but to update to reflect the new timeline, and it amends the Ed Fund Advisory Committee directives. Sections 80 through 82 are exactly these pieces. This is your EOP transition, your supplemental interest spending cap transition, and your homestead property tax rate transition. No substantive changes to any of these pieces from act 73, just aligning the timeline with that here. Section 83 similarly is an existing section from act 73, and the request was to delay the tax report on the homestead rate transition by one year to 12/15/2028. You'll see the full text of it in the bill because I also had to correct an issue with the effective date of the underlying section back '73.

[Unidentified committee member (possibly Rep. Tiffany Bluemle)]: Marty, on the supplemental or the transition gap that's described in 'eighty one and 'eighty two, I think. Are these the same ones that we discussed before?

[John Gray (Office of Legislative Counsel)]: They are the same. The meaningful difference is, and I don't have the text in front of me right now, but what I recall is I did have to update the years for the call out, for the gap itself. So we still reference the FY '25, but you're getting the latest possible gap you could be The most up to date information free foundation formula rollout. So same concept that was in x '73, but trying to reflect that updated timeline.

[Unidentified committee member (possibly Rep. Tiffany Bluemle)]: Because I was trying to run through those and I

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Yeah.

[John Gray (Office of Legislative Counsel)]: Section 84 similar to section 83, it delays an act 73 department of tax report on the homestead exemption structure, in this case, by two years to the same date, 12/15/2028. And then section 85 amends the statute that creates the Ed Fund advisory committee and makes it I'll use the language that I received in email a bit more technocratic. It reduces the membership to six members of the public with expertise in financing plus one rep from the Vermont School Boards Association with expertise in financing. It narrows the committee's responsibilities and delays that first meeting the 2031 after the rollout of the foundation formula. In short, it makes this not a transitional committee that is assisting throughout the process. It makes it something that kicks in post foundation for that rollout. That is it.

[Rep. Wayne Laroche (Member)]: Thank you. Sure. And

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: thank you. We've got the treasurer's office, folks from the treasurer's office here. We've just talked about school construction and bonding. And so we're going to have them talk and then we'll

[Unidentified committee member (possibly Rep. Tiffany Bluemle)]: have Julia come up with us.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: So thank you all for hanging out with the Sicking Widows. Nice to see you.

[Rep. David Yacovone (Member)]: Thank you very much. Sheldon, if you want to

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: come and bring a chair with you. If you don't mind. Thanks for coming on short notice. Course. Appreciate it. We did hear about school construction. You walked in just as we were going over the school construction aid, bonding is involved. I know the treasurer's office at some point would be making a recommendation, and you're not doing that today. But at least we'll get to take it over. You, Madam Chair. Shelton, take it away from the side.

[David [last name unknown] (Deputy State Treasurer)]: Thank you, Madam Chair, thanks to the committee. For the record, David Chair, Deputy Treasurer. Scott Baker, Director of Debt Management. And as the Chair mentioned, we are the Treasurer himself has not taken a position on the bill or any on any aspect of the bill, but we have been throughout the process, happy to provide some technical advice around bonding, bonding capacity, some of the risks around increasing the debt burden on the state as well as ways to mitigate some of that risk. So without any further ado, I will turn it over to our director of debt management, and he can talk a little bit about the state's bonding capacity, how some of the predictions and assumptions have been arrived at through the CDAC and through our financial advisers, and we're happy to answer other specific questions as well.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: And thank you for bringing copies. We're actually gonna have more copies of the bill. And this is posted on okay. And it's posted for the rest of mine.

[David [last name unknown] (Deputy State Treasurer)]: You should start because I'm having some technical difficulties, but I'm glad you have paper copies, we'll get it on the screen in a moment.

[Scott Baker (Director of Debt Management, Office of the State Treasurer)]: Okay. So basically talking about bonding capacity for the state, it starts with CEDAC, the Capital Debt Affordability Advisory Committee, and that's made up of the state treasurer, secretary of administration, representative from the bond bank, two governor's appointees, one treasurer appointees, and two nonvoting members, the state auditor, and the legislative economist. They meet annually, and issue issue a report by September of each year with a recommendation to the governor and the legislature of how much debt the state can prudently issue based on a number of factors, which we'll talk about in a few minutes. This year, they look at a number of scenarios and they run ten year projections based on issuances of certain size. It recommendation is for the biennium, so a two year recommendation. So in September 24, they came out with a two year recommendation. They looked at authorization levels. They ran scenarios at 100,000,000, 108, 123.08, which is the prior year biennium and the highest of $1.70 102,000,000. And that amount was based on the ten year capital plan from the administration, what they were using for this, that biennium plus eight years forward came out $86,000,000 per year. So that was the high of the scenario that was run. So based on that, based on those scenarios, a number of factors, SDAC issued a recommendation of 100,000,000 for the biennium for roughly 50,000,000 per year. And that's the amount that goes into the capital build for all the projects that are authorized. It's per 100,000,000 for the biennium. The reason it was lower, it has been going down for the past several years, but there were a number of factors such as just the economic volatility, the fact that there was still supply chain issues, mainly they could not get contractors to do the work. The administration spoke and said that basically they couldn't they were not able to spend more than 50,000,000 in that biennium, So no sense in issuing debt if you're not going to be able to do the projects. This past September 2025, they met again and confirmed the 100,000,000. Again, they do a two year recommendation but they meet in the off years and they can adjust that if needed.

[Rep. Wayne Laroche (Member)]: So the 100,000,000 is based on what they could actually get out the door, not how much we could endure in terms of debt and service debt.

[Scott Baker (Director of Debt Management, Office of the State Treasurer)]: Correct, correct.

[Rep. Wayne Laroche (Member)]: So what get any estimate of what we could have serviced for debt? Yes, we will get that, I guess.

[Scott Baker (Director of Debt Management, Office of the State Treasurer)]: So the next slide shows what the authorizations have been for the last twenty years and see since the twenty fourteen-fifteen biennium, it has been constantly reducing the debt. One important note is that whatever the CDAC recommendation has come in at, the legislature has always followed that recommendation and put that amount into the capital bill. That's something that the rating agencies have given us a lot of credit for. Very important to have that outside source and any agreement among all. So that's been important. The next slide, just wanted

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: to point out one of

[Scott Baker (Director of Debt Management, Office of the State Treasurer)]: the reasons that it was stuck at that it was kept at 50,000,000. You can see that this shows the the actual bond issuances and authorizations over the years. That last bar, the green bar at the end, represents authorized but unissued debt. And so what that represents is our projects that have been authorized to be spent, but the money the projects are not going forward right now, so we're not going to issue the debt until we're actually spending it.

[Rep. Wayne Laroche (Member)]: So that's the answer to my question.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: I have a question on the debt levels. Post pandemic, construction costs have gone up 30% or more, whatever, inflation and all of those things. So how do you account for that in here? Just like we aren't.

[Scott Baker (Director of Debt Management, Office of the State Treasurer)]: I mean, is a risk. A lot of these projects go back several capital bills at a certain amount and with inflation, that amount may not come in.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: How do you think about it going forward? Not just the ones that don't go out the door, but when you figure out how much debt the state can reasonably borrow, do the rating agencies, do other people look at inflation? Because $50,000,000 in 2016 is not like $50,000,000 in 2026. Yeah, I mean, that

[Scott Baker (Director of Debt Management, Office of the State Treasurer)]: is something that is discussed. That is one reason to bond is if you do have high inflationary rates, bond for it and pay for it in the future. It's something that they always look at debt levels according to inflation and the amount of this authorization is actually quite low, especially given inflation.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: So when we make the decisions, when SEDAC makes the decisions, they don't take inflation into consideration.

[Scott Baker (Director of Debt Management, Office of the State Treasurer)]: They do look at that. So the main things they look at, so CDAC benchmarks are debt metrics to AAA rated states and there are about 17 states that have at least two AAA ratings. We use Fitch, S and P and Moody's. Vermont is rated the second highest notch, AA plus with S and P and Fitch, AA1 with Moody's, the second highest. Generally when we price, we price as if we were a AAA rated state because we do not issue a lot of debt. We're a small state. It's pretty well received. There's a lot of demand for it. So that's why we benchmark against AAA rated states. Better you're rating, the lower your interest costs, so the more you are going to save. Other states have been issuing less debt, so when SEDAC does metrics comparing against those states, all the other state metrics are going down. You know, I mean, So, they do look at that, but it's all relative to other states as well.

[Rep. Wayne Laroche (Member)]: So when we're paying off bonds that are eighteen, twenty, so we're paying them off with a depreciated dollar,

[Scott Baker (Director of Debt Management, Office of the State Treasurer)]: Sort of, yeah. When we issue by statute, we issue twenty year bonds maturing in equal or diminishing levels. If we did $100,000,000 bonds, would be $5,000,000 maturing each year for twenty years. There's generally a lockout of ten years, so we can't refund those. But every time we do an issue, we look at the older bonds and if we're able to have some cost savings, we will refund those, kind of like refinancing your mortgage, right? So we'll issue newer bonds to pay off the older ones. So yeah, in effect, that's what you're doing. Right now, the oldest bonds we have outstanding are from 2015, so so they're only ten years old, so the ones issued before that have pretty much all been refunded.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: I have another question here from John.

[John Gray (Office of Legislative Counsel)]: Real quick, so as we're thinking about bonding projects here over time

[Rep. Wayne Laroche (Member)]: here, like these buildings and so lots of things here. Where's the contingency, you know, for that cost of a project? Where would that lie? Would that be part of the bonding part of things here as well, would that be part of more of the book pieces you're describing? The contingency

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: that's built into the overall project is correct. That would be helpful. Yeah, and one of the things that is different about this version of state school construction program compared to our previous school construction program is that things, making sure that all of that is in place and well planned is going to

[Scott Baker (Director of Debt Management, Office of the State Treasurer)]: So recently along with this, we were asked to analyze the state's issuance and although CEDAC recommended 100,000,000 or 50,000,000 per year, we were asked what's the school construction bill coming out? How much could we do? It's still stay within our benchmark. So that's the way we went about it. So this first chart shows this is the current projection of 50,000,000 per year or 100,000,000 for the biennium. These are the three main metrics, debt metrics that we look at. The first section, debt per capita. The second, debt percent debt as a percent of personal income, and the last one, debt service as a percent of revenue. The top part of each box shows the past ten years. The bottom part of the page shows the ten year projections as if we were going to issue this amount every year for the next ten years. Also taking into account the authorized but unissued amount being issued over the next several years. So what this shows is the shaded piece shows that our debt per capita will be outside the state guidelines. So, the the shaded piece shows what the Vermont projected debt per capita will be. The column right next to it shows what what we're trying to benchmark against the state guideline and and that represents the the AAA rated states, their average debt per capita going forward. So this is one of the metrics that SEED Act looks at, although this is probably the less the least important of these three because we are a small, you know, small population state. Debt per capita tends to be a little bit higher. It's something the rating agencies look at, but not weigh it very heavily. We've been out of compliance in debt per capita for quite a while and it's again, it's not the most important. So doesn't pay much attention. The next column, debt as a percent of personal income, kind of shows what the taxpayer, what their tax burden is, and set the state guideline going forward at 1.8%. This number is pretty volatile among the other states, kind of goes from 1.6 up to 2.1 or so. We just picked the 1.8 guideline, stick to that. And you can see it issuing 50,000,000 per year going forward, we're in compliance with the state guideline for the next ten years. The last section, debt service as a percent of revenues, kind of represents the ability for the state to pay the debt, and set the state guideline at 4% of revenues. This is in the past, this last biennium, see that just lowered the guideline from 6% to 4%. Back when we had a lot of debt, it was 8%. And so that's as our debt load has come down, this has come down as well. One important note is our debt, we have about $550,000,000 of outstanding general obligation debt. Rating agencies are paying more and more attention to long term liabilities, meaning your pension and OPEB liabilities now. So even though we have 500,000,000 of debt, we had 4,000,000,000 of long term liabilities. So yeah, it's something they're paying more attention to.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: So, in the first one, we aren't doing so well, in items columns two and three, we would still be below what our state guidelines were. Correct. Even if we borrowed the $50,000,000 a year.

[Scott Baker (Director of Debt Management, Office of the State Treasurer)]: So this is the current, this is what we're doing now. This is what is in the capital bill, 50,000,000 per year. Okay, got it. So the next slide here shows if we did an additional 50,000,000, so 100 per year. So that would represent what's in the capital bill now plus another 50,000,000. And so we ran the projections, and again, the debt per capita, as you'd expect, still out of compliance. Debt as a percent of personal income and debt service as a percent of revenue, we still stay within the state guidelines.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: So same answer, but just I'm just getting the wrong chart. Okay.

[Kirby (Office of Legislative Counsel)]: So

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: we're in better shape for two and three. We're fine, we're under the guidelines.

[Scott Baker (Director of Debt Management, Office of the State Treasurer)]: Right, yeah, and again, one of the scenarios that CEDAC looked at was $86,000,000 per year based on the ten year capital plan. This was slightly more, but we're still in compliance. 100,000,000 again this isn't a CDAC recommendation this was just what we were asked to run so right

[Rep. Wayne Laroche (Member)]: and we paid into the pension to try to draw that down, right? Yes. So as we pay into that, pay $100,000,000 into the pension, how much benefit do we get in terms of how much it could draw on bonds?

[Scott Baker (Director of Debt Management, Office of the State Treasurer)]: So it is a factor that we're looking into. These debt metrics don't take the pension to account. Do look at the debt metrics in comparison to that. It's something CDAC looks at. It's not included in here, but

[John Gray (Office of Legislative Counsel)]: It would help. Yeah, as the

[Scott Baker (Director of Debt Management, Office of the State Treasurer)]: pensions are getting paid down by 2038 and '48, that's going down. So, yeah, the debt you could certainly, yeah, that would make a difference. Again, it's a little ways to go on the pensions, but we're making good progress on it. The third scenario that we ran was an additional 100,000,000 on top of the CEDAC recommendation of 15. In a capital bill plus 100,000,000 and you can see all three all three metrics that are out of compliance in that. So again, this just represents using the CEDAC guidelines that we're currently using, issuing at these levels, whether we would be in compliance of those guidelines or not. So anyways, so that's what we were asked to do. That's where we came up with the additional $50,000,000 I think that was talked about.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: That was the Goldilocks one. It's just right. Great. Thank you. Any questions for me? This was really helpful. I really appreciate you coming in on the shortlist. Of course. And

[Kirby (Office of Legislative Counsel)]: just to know that the Treasurer does recognize the importance of this issue and it's happening, keep working

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: with it. Yeah, well, I'm sure that there will be the appropriate time to make a recommendation, but it

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: doesn't have to be Chittenden.

[John Gray (Office of Legislative Counsel)]: I'll Chittenden. Yes. Thank you. Thank you so

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Committee, how are we doing? Do you want five minutes to take a break before we go, or do you want to just keep plugging through?

[Rep. David Yacovone (Member)]: How much more to please share?

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Are going to hear from Beth maybe briefly, if you have anything more to say to us, and then Julia is going do the fiscal note, and then we're going to take a break and think about it all. Want to keep on going? If you need to take a break,

[Scott Baker (Director of Debt Management, Office of the State Treasurer)]: do you a time to I get know it's going to

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: be mostly Julia. Beth, why don't you join us since you've come in? Do you need a clementine?

[Beth St. James (Office of Legislative Counsel)]: Or 10?

[Julia Richter (Joint Fiscal Office)]: No, I don't say anything. Beth

[Beth St. James (Office of Legislative Counsel)]: St. James, Office of Legislative Counsel. I did have several sections in the Ways and Means Amendment that were me. Great.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: And we have to section by section if that's Whatever you would prefer to use. Well, it's what we've been using. Oh, Okay, great. So if you don't mind.

[Rep. Eileen "Lynn" Dickinson (Member)]: Not at

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: all. Okay.

[Beth St. James (Office of Legislative Counsel)]: And are you wanting me to show it on the screen?

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Are you able to do that? Yes. Why don't we do that?

[Beth St. James (Office of Legislative Counsel)]: Is it posted on your website? It should

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: be posted on our website. And some of us have paper copies and some of us don't. But Herbie started with section 30, so I assume you have the sections before that.

[Beth St. James (Office of Legislative Counsel)]: Everything before that.

[Julia Richter (Joint Fiscal Office)]: You just sign into the Zoom.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Okay. You're hosting.

[Julia Richter (Joint Fiscal Office)]: Okay. So we're going to go all the way back up to

[Beth St. James (Office of Legislative Counsel)]: the first instance of amendment. Did you guys get oriented into the instances at all yet?

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: No? We may have, but go ahead and do it again.

[Beth St. James (Office of Legislative Counsel)]: So there are several instances of amendments to the underlying bill as introduced, which was house educations work. And then instance eight is all of the brand new sections that ways and means added. So I'm going to take you through the first seven instances of amendment and then the first few sections of the eighth sub amendment. So the first instance of amendment was to Section four in the underlying bill, and it was that appropriation change that we talked about last week. It's been so long. Several times, the Ways and Means Amendment does this where we are just not changing the amount of an appropriation, but making the appropriation an allowable use of the Act 73 Education Transformation appropriation that is amended in the budget and sections C 103. So that's all the section, the first instance of amendment was. The second instance of amendment was to Section 13, which is that long section on Union School District creation, consultation and facilitation. And it adds a requirement that when the facilitators are forming study committees, they should also be taking into consideration, along with what the underlying bill requires, grant list values accounting for the homestead exemption and current education spending.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: What's that mean?

[Beth St. James (Office of Legislative Counsel)]: So when they're looking at grand list, my understanding, and I'll What? My friends on the Okay.

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: Go ahead. So one of the pieces of this new process is ideally when we have new districts, they might have brand lists, like total brand list values that are comparable to each other, so that the difference in essentially the cost of raising revenue would be similar from district to district. That was a provision in Act 73 when it was around sort of designing districts. And we want to make sure that as districts are managing this themselves a little bit more, we're supporting them to think about this really important piece of some degree socioeconomic diversity, but also something that will make a big difference in easing consistency state or district condition for tax responsibility.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: So some grantless regional districts might have a much higher grant list than some other, because different areas of the state have different brands.

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: And so a great example is sort of in some versions of the draft maps of education put together Barnard and Woodstock were in a district with one of those middle ski hounds if you put White River Reduction or Hartford in with that, it would really stabilize the grand list and bring it much closer to the grand list values of the district that was South Of The Rockland. And this doesn't mandate it, it just reminds them to think about such things.

[Rep. Wayne Laroche (Member)]: Think about those things. Wayne? That's why my question was, You're not giving any instructions other than for them to think about it. But if you're not giving them any if it's this way you do this, if it's this way

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: you do that. The underlying language that came from house education didn't and so we didn't want to cut the apple cart of all the hard and good work that they had done, we just wanted to add in this little don't forget about this. Thanks.

[Beth St. James (Office of Legislative Counsel)]: Okay. Third instance of amendment section third, we're still in the same section, the Union School District Creation Consultation and Facilitation. Amend adding a new Subdivision 6 to subsection B that requires facilitators to monitor the work of the general assembly related to education transformation and share the most up to date fiscal modeling with study committees. So if JFO publishes a report or some modeling, the facilitators are required to be aware of it and share it with the study committees. Fourth instance of amendment is to Section 17, Study Committee reimbursement grants. And I'm just going to summarize this very quickly by saying these are all of the various grants to start up CESAs to fund the study committees, to fund the facilitators, etcetera. There were some slight changes to the language, but the by ways and means, but the underlying concepts remain the same. The big substantive changes in this fourth instance of amendment are the where the money is coming from. So instead of a brand new appropriation, all of the appropriations in Section 17 have been made an allowable use of that Act 73 education transformation money. It was amended in the budget under Section C103.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Right. So when we think about our role in this, the general fund has already been the money's already been accounted for in the budget. But this is going to have the language that will further clarify how that money gets spent. We tried to do what we could in the budget, but we were pretty general. And this

[Rep. Wayne Laroche (Member)]: is the amendment I was expecting to see around this. So Wayne? So we've seen the budget originally, but we put in there, it wasn't had some cushion extra that this comes out of, or was it anticipated?

[Rep. David Yacovone (Member)]: No, no, there wasn't.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: I mean, the age of education asked for $4,000,000 for transformation. We tried to press them on specifics last year and they weren't really able to give us specifics. We had some, but not a lot. But now that we are getting into actually having more specifics on the bill, we can designate the money more clearly. So that's what this does. I think

[Unidentified committee member (possibly Rep. Tiffany Bluemle)]: we have a problem though, in that it's general fund to the AOE, in Section 17B, the 442,000 is going to the Provost LC. Do we need to make a change on that?

[Beth St. James (Office of Legislative Counsel)]: One of the changes that Ways and Means made that I skipped over in the interest of time is that they changed who that appropriation is going to, and so it's going to AOE now.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Well then further give it to Right, the see that.

[Unidentified committee member (possibly Rep. Tiffany Bluemle)]: It's not in their draft bill, is it?

[Beth St. James (Office of Legislative Counsel)]: In whose draft bill? Wasting? Yes, it is. It requires that we grant that money to the Learning Collaborative within forty five days of passage.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Right.

[Beth St. James (Office of Legislative Counsel)]: Fifth instance of amendment is an amendment to section 18, which is amending the effective dates in Act 73, most specifically the foundation formula contingencies.

[Rep. Wayne Laroche (Member)]: I'm

[Beth St. James (Office of Legislative Counsel)]: trying to think of how to summarize this.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Oh, it goes out in a year or two years or whatever based on what the rest of the bill says.

[Beth St. James (Office of Legislative Counsel)]: Yes, it changed. So it bumps the date from sevenonetwenty nine to sevenonethirty for the December 1 letter, bumped the date from sevenonetwenty eight to sevenonetwenty thirty for the foundation formula and other tax changes. And then there were amendments to the contingencies themselves.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: They had to line up with the new dates. And so this timeline that you guys have is really the place to look at all that Because, yeah, that's a lot easier to try

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: to build a loose leaflet from.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: They have colors too, that's even better. Those are Kirby's colors. Thank you, Kirby. I like your colors.

[Beth St. James (Office of Legislative Counsel)]: Would you like me to go into any more detail about this instance of amendment?

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: So I think the concept Okay. For dates.

[Beth St. James (Office of Legislative Counsel)]: Happy to answer questions at any point.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Okay.

[Beth St. James (Office of Legislative Counsel)]: Sixth instance of amendment is to the pre K language that was in the underlying bill section 21. The general concept that you're going to get a report back related to pre kindergarten funding remains the same, but ways and means did make several changes here. So it keeps some intent language the same, but it requires AOE. I'm on page four of the section by section summary. It requires AOE DCF and building bright futures to establish a system to jointly monitor and evaluate pre K programs. It requires Building Bright Futures to report annually to the General Assembly in consultation with the AOE and DCF. It requires Building Bright Futures to submit a report to the General Assembly on or before 12/01/2026, with information related to Building Bright Futures work under the Federal Free School Development Grant and data collection, their initial findings under that grant, outstanding gaps in data they've identified, and any legislative recommendations, all related to pre K funding. And it also requires JFO to hire a contractor to conduct an updated cost of care analysis to account for pre K within VT's education system. This concept traveled in the house education version as introduced, but JFO ways and means changed the actual words on the page a little bit with more specificity as to what the JFO report would be coming back to you all with related to how to account for pre K within the education finance system, and also with recommendations for different funding mechanisms to use to distribute costs for funds for education costs, including all of the various different options. That's coming back to you on or before December 15. And there is a $75,000 appropriation that is not attached to the Act 73.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Right. And it's not in the budget that we have money on the bottom line in the budget to take care of this. So far.

[Rep. Wayne Laroche (Member)]: Well, the Senate, I think, knows what this is. And then My question is maybe more for Emily.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Pre

[Rep. Wayne Laroche (Member)]: K stuck on this thing. We're dealing with a huge problem. Feels like to me that Pre K is stuck on like a the tail on the donkey kind of thing. Just wondering.

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: We'll get bit casually about this. I think the staff is talking back that I've had some like temporary entrance about the fact that we can't solve this problem this year. We don't have the data we need to make, the decisions we need to make still, even though we have studied this at length. It's not any one of those rooms fall through. We still don't know how many hours children are aware they are, and CCPAC is calculated sort of by the hour and pre k it's by the like another block of time and we've been asking the agency of education to tell us how long a school day is but they only have instructional hours and a number of hours in the classroom. Anyway, it's like we need to actually, we need this study in order to figure it out next year and I'm so committed to figuring this

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: out next year because we

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: have been kicking the can for quite a few years.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: So I think there's a lot, there's another question that I think I'm hearing from Wayne, which is why is pre K part of K-twelve education? Oh, is that your question?

[Rep. Wayne Laroche (Member)]: Yeah, why is

[Rep. Eileen "Lynn" Dickinson (Member)]: Oh, that's right. But that's

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: also good for us to know.

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: Yeah, didn't need to tell you about my number of extra options. Act 66, which passed before I joined the legislature and created a mandatory obligation to pay for ten hours a week of pre K for three and four year olds by school districts. So school districts do that now out of the education fund in various ways that are quite inconsistent from district to district because of what is available from district to district. And as we move to that is, and then we wait each of those students in a manner that is not as scientifically derived as could be. And so we've had various sort of rounds of trying to get our hands around this. And as we move to a foundation formula, it's going be even more important to really get entirely clear on what those ten hours means consistently around the state. And that is what we're going to do next year once we have this information.

[Rep. Wayne Laroche (Member)]: So you're telling me that what this does is gives you information that you're going to need to work on your foundation formula with?

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: To decide if pre k should be included in the foundation formula or if it should be a categorical grant separately or if it should be entirely funded by CCPAF or whatever. But the way that we have the law set up right now won't work at all and it needs to be fixed before the foundation for a realistic method with regards to pre K.

[Rep. Wayne Laroche (Member)]: Where I was going was why isn't that a separate bill? Why is it tacked onto this? Because this seems like a We're dealing with a huge problem here.

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: But it's necessary for the foundation formula and about a third of our language is changes we need

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: to make to have a foundation for the program.

[Rep. Wayne Laroche (Member)]: Thank you. That answered my questions too about it.

[Unidentified committee member (possibly Rep. Tiffany Bluemle)]: That was helpful. Okay, Beth, continue.

[Beth St. James (Office of Legislative Counsel)]: Seventh instance of amendment is adding a brand new section to H-nine 55, which amends the pre kindergarten statute itself, which is 16 BSA eight twenty nine, by adding a new subdivision to the tuition subsection in the statute, which requires a district of residence to report annually to AOE on the number of hours of pre K education received by each pre K child for whom it has provided pre K education or on whose behalf it is paid tuition pursuant to this section. And it adds Building Bright Futures to the subdivision E1, which is the rules subsection to require building bright futures to work with AOE and DCF to establish the system to monitor pre K programs. Now we're in the eighth instance of amendment, which is the instance of sections 22 through 86, which were all added by ways and means. So section 22 amends section 16 BSA forty ten subsection C, which is your waiting statute. And it requires school districts to require each resident student in grades pre K through 12 on whose behalf the district pays tuition to complete a form or forms developed by AOE to obtain the info needed for AOE to compute the weighting categories for tuition students. It requires the form to be included with any residency verification forms or requests for public tuition funding forms required by a school district.

[Unidentified committee member (possibly Rep. Tiffany Bluemle)]: Yes, Marty. So is this the current weighting system or the foundation formula weighting system?

[Beth St. James (Office of Legislative Counsel)]: Current weighting system, and then it would travel to the foundation formula as well.

[Unidentified committee member (possibly Rep. Tiffany Bluemle)]: Isn't our basis for the weights and the foundation formula very different than our basis for weights right now? Eileen? So the way, so what weights means under current law is very different from what a

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: weight would mean under future law, but we, no matter how many dollars or tax benefits or tax capacity is attached to it, we still need to actually count the children. Right now, there are certain children who are tuitioned over the border into New York or into New Hampshire. It's where maybe students who are tuition for two independent schools that don't aren't part of the school meals program. None of those students are actually counted properly. And it's frankly to some degree loophole in when we passed on 27. We said if they may collect the information, should say they shall collect the information. And so we want to make sure that under the foundation formula, when it's even to some degree more important that we count the children right, that we just count the children.

[Unidentified committee member (possibly Rep. Tiffany Bluemle)]: So this is more counting them. All this does is count them.

[Rep. Wayne Laroche (Member)]: So they talk about slots like a daycare, have so many slots, but we don't actually know how many people are in those slots on a day to day basis or what the total number of slots are filled during the course of the year.

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: So my understanding is that the technical term for this, he negates cuts and seats, Butts and seats.

[Rep. Wayne Laroche (Member)]: Exactly. So

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: it's not slots, it's actual children in the bus.

[Rep. Eileen "Lynn" Dickinson (Member)]: I like that.

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: Yeah. Did not invent it. I don't know who says it, but it is sort of the turn of arch.

[Rep. Wayne Laroche (Member)]: It would be nice if we were actually paying for the kids in the seats, not just a seat.

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: Yeah, I don't think we're paying for seats. I think we're paying for children in seats.

[Beth St. James (Office of Legislative Counsel)]: Okay, let's continue. Section 23 is the special education funding safeguards and legislative intent section. The vast majority of the section is legislative intent made with the purpose of making sure that any spelling out your legislative intent that any changes to the finance system for education also comply with federal maintenance of efforts related to special education funding. Again, in the interest of time, I think I'm going to leave it at that unless anyone It's

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: probably all we need.

[Beth St. James (Office of Legislative Counsel)]: Section 24, I'm on page six now, is an amendment to section eight twenty eight, which is the tuition statute. This is the statute that tells school districts who they're allowed to pay tuition to. And the amendment made in Section 24 would prohibit a school that is eligible to receive tuition from requiring tuition or fees of any kind from a student attending the school on public tuition above the amount a school district pays in tuition pursuant to Section eight twenty three. This language will not take effect until the foundation formula takes effect. So the tuition paid pursuant to Section eight twenty three is the base amount plus weights for each student. So it's prohibiting a school that is eligible to receive tuition from charging families more than what the child would bring with them from the school district. It also prohibits public school, public receiving, so that piece would apply to any school that is eligible to receive tuition, so that's public and private. And then clarifies, the section further clarifies that public schools, public receiving schools are prohibited from requiring tuition or fees of any kind from the above the amount a school district pays in tuition for both resident students and tuition students. So if you can't charge a fee to your tuition students, you also can't charge a fee to your resident students.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Oh, you could charge a fee to both?

[Beth St. James (Office of Legislative Counsel)]: No, you cannot charge a fee Okay.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: I'll have either the site one or both. Got it.

[Beth St. James (Office of Legislative Counsel)]: Section 24A is just intent language that explicitly states that the topping off prohibition that we just talked about in section 24 only takes effect at the same time as the foundation formula provided that the contingencies have been met. Section 25 is an amendment to 16 VSA section seven zero seven, which is part of Chapter 11, the Union School District Formation and Governance chapter in Title 16, that amends the amount of a study committee's budget that requires voter approval. So under current law, if a study committee's budget is $50,000 or more, all of the school districts participating in that study committee have to get voter approval for that budget. Ways and Means has raised that amount to $500,000 So if the budget is under $500,000 it would not require voter approval.

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: Please. So the reason we did this is not because we think they'll spend $500,000 but we think at $50,000 that actually could be the vote. That could be the cost of a vote. I don't know if you remember a couple

[Julia Richter (Joint Fiscal Office)]: of years ago, we were sort of paying

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: for individuals for elections because

[Rep. Eileen "Lynn" Dickinson (Member)]: of the need to pay.

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: And so we don't want them to spend more money voting than they would actually raised, than they would actually need to raise. It would still need to fit within their existing budgets as Warren voted. It would just be how much they would be sort of shifting from one spot in their budget line items to another spot in their budget line items. We had lots of conversations, frankly representative, I think, Ogie, representative I think, went off to try to find some milligram between the two members and came back and decided that 500,000 was fine. But we do not want anyone to spend that much money and just wanted it to be about

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: claiming was way too above to require a vote. Thank you for clarifying.

[Beth St. James (Office of Legislative Counsel)]: Section 26 requires the State Board of Education to update its education quality standards rule series to establish criteria for identifying schools small by necessity or sparse by necessity on or before 03/31/2027, unless LCAR gives them an extension. And those rule updates are required to be consistent with the work of the small school committee of the state board of education and their recommendations dated 12/17/2025, which is what they have given to the general assembly this year based on their work.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: So if we want to find that, we can go.

[Beth St. James (Office of Legislative Counsel)]: Can certainly

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: send it. Yeah,

[Rep. Eileen "Lynn" Dickinson (Member)]: be curious to find.

[Beth St. James (Office of Legislative Counsel)]: Section 27 requires the State Board of Education to adopt updates to the district quality standards rule series to establish criteria for intra district budgeting. And they have to establish those updates on or before 03/31/2027, unless LCAR gives them an extension. And those rules shall ensure resources are allocated across schools within each district in a way that provides substantially equal educational opportunities and enables students to achieve or exceed education quality standards. -Section 27A amends Section seven from Act 183, which was the yield bill from 2024, to require AOE. So section seven and act 183 of 2024 require the agency of education to update the district quality standards to include recommended reserve fund account standards. My understanding is that hasn't happened yet. And so this language is is requiring AOE in collaboration with some new folks, the ASBO, the Vermont Superintendents Association, and the Vermont School Boards Association to complete those rulemaking updates.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: The hospital is the business officers.

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: Yes. I learned that today.

[Beth St. James (Office of Legislative Counsel)]: Then there could be an A. It should be VASBO. Only human. 27B, school transportation grants. This requires a report back to you all with a whole bunch of information related to transportation that's happening either within school districts or around school or basically education related transportation. So a report back on or before December 1 with information regarding what grades each school district provides transportation for, whether a school district owns or leases their vehicles, whether public transport is used and the costs associated with public transport for school purposes, the methods by which students get to and leave school. So is it school district providing transportation? Is it public transportation? Is there a receiving school sending transportation to get those students? And what are the costs associated with that? Are mom and dad driving kiddos or parental or grown ups driving kiddos? And what's the aggregate costs associated with all of that information on bus driver pay and benefits and aggregate education transportation costs? Then after AoE has given you all that information, they're required to make recommendations for the following geographic radius around a school within which transportation is not required, definitions for distance students and safe walking routes, how CSAS may fit into education transportation, a co curricular and after school travel could be included in a district's transportation services, funding recs for the new finance system, legislative updates to the transportation reimbursement statute, and how to ensure students attending. CTE centers other than their assigned center have access to transportation to the same extent as if they were attending their assigned CTE center.

[Rep. Wayne Laroche (Member)]: Got a question, but not on that. Criteria for intra district budgeting. Give me an example of what you have in mind there.

[Beth St. James (Office of Legislative Counsel)]: Yes. So under the foundation formula, a school district is going to get an education opportunity payment, right? And then there's going to be other categorical aid and other pieces of funding coming to them. And so inter district budgeting would be recommendations on how school districts should allocate that lump sum across the needs of the entire district.

[Rep. Eileen "Lynn" Dickinson (Member)]: Oh, Lynn? Yeah. There's a requirement in here for bus driver pay and benefits. There was a time when the school districts hired their own bus drivers, bought their own buses, and they were part of the support staff, whether they were in a contract or not. How would a school district or school districts know if they'd contracted out with Mountain Transit or Bell Transport, whatever the local transportation, they get a set amount, take care of it, they do the games, they do the transportation for

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: Go ahead. Idea is we wanted some schools should still do exactly what you described when they go to buses and having their staffs. We wanted to make sure that we were making space that would work for that scenario with this language and that we're also making space for the contracts scenario. There's so many different ways of doing it. List is way too long, and we wanted to, because there's such a incredible diversity of how school transportation works in the state, we wanted to make sure that we're hitting on every single instance.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Okay, Great.

[Beth St. James (Office of Legislative Counsel)]: Section 27C, student profile form. That form that we talked about a couple of sections up about weighting categories for tuition students, this is asking AOE to develop that form in consultation with school business officials. Section 27D, another piece of rulemaking, requires the State Board of Education to adopt updates to the length of school day rules. There is an entire rule series. It's not very long, but it is a separate rule series related to the length of school day. So this asks the State Board of Education to update those rules to establish criteria for the length of a school day for each grade, pre K through 12. Right now pre K is not represented in those rules, that is consistent with the definition of school that we're gonna walk through in a minute.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: The first question.

[Rep. David Yacovone (Member)]: Yeah, in sections 26, 27, you have dates certain for rulemaking, and I don't see one here.

[Beth St. James (Office of Legislative Counsel)]: Oh, that may be something that was overlooked.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: So is that in the actual language or in this section?

[Rep. Wayne Laroche (Member)]: No, I don't know. I'm just asking the question.

[Beth St. James (Office of Legislative Counsel)]: I am gonna make an assumption. I drafted this section by section looking at the language. So I'm gonna make an assumption that it's not in the language if I didn't include it in the section by section. But I can certainly connect with chair coordinator.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Yeah, because you may have So you can add this to your technical amendment. We do not need to do the amendment from here. Thank you.

[Beth St. James (Office of Legislative Counsel)]: Section 28 is a repeal of Section 37 from Act 73, which was the section that established or created Section forty nineteen in Title 16, which is the small school sparse school support grants. And the reason it is being repealed here is because that section under Act 73 does not take effect until the foundation formula takes effect. But we want to make changes to that language now. And so there's no easy way to do that other than repealing what you did last year and reenacting it this year with the new language we want to add. This is a concept, if you all continue to follow education reform, this is a drafting concept you are going to see repeatedly over the next several years, where we are having to repeal language that has not gone into effect because you want to make changes to it before it goes into effect.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: So that's the cleanest way to do it.

[Beth St. James (Office of Legislative Counsel)]: That is the cleanest way to do it. Yes. Both for my office when we go in and make sure the green books are accurate, for anyone who's following along legislatively and trying to piece together the history and also so that we're not making any mistakes. We're not leaving pieces here and there. My office is in discussions on if there's any easier way to do it, and there really isn't. Imagine the kind

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: of thing you'd end up with if you did it somewhere. Right. Wouldn't be pretty. Right. Okay.

[Beth St. James (Office of Legislative Counsel)]: So that's the only reason that repeal is there. So that in Section 29, you can take what you enacted in Act 73, plop it right into Section 29, and make some very small changes. And those are: Current language in Act 73 requires the State Board of Education to make the determination for whether a school is small or sparse and therefore entitled to the grant. This is changing it to AOE making that determination. Oh, okay. It also adds some clarifying language to make sure to make clear that these grants only apply to public schools operated by a school district. So occasionally we've inserted the word public in front of school or the term operated by a school district to make that clear. And then I put that little asterisk there since the section of law had not taken effect yet, we needed to repeal it totally and then just reenact it to make changes. And then this new section 29 would not take effect until 07/01/2023 if the contingencies were met, same as the foundation formula. And then the last section that I am responsible for in this amendment as it stands now. Section 29A is amending section 16 BSA section 11, which is the master definitions statute for all of Title 16. It is a very long list. We're in the 40s of terms. And so we're adding definitions for these terms to the very end of that statute. And I have not enumerated, I have not spelled out what those definitions are. I've just highlighted what the terms are. And those would take effect now, those would take effect 07/01/2026. Those

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: are all best sections. Marty?

[Unidentified committee member (possibly Rep. Tiffany Bluemle)]: Can we go back briefly to section 24, the one about not the additional payments to either receiving or sending schools beyond? '24, yes. It talks about the tuition first it went to $8.23

[Beth St. James (Office of Legislative Counsel)]: and you said that's the base amount. Do we need the base space in the foundation formula or do we need the weighted amount? So section eight twenty three, the reference to section eight twenty three is a reference to the tuition statute. And the tuition statute spells out how you calculate tuition. And under the foundation formula, tuition is calculated by the base and the weights applicable to each student.

[Unidentified committee member (possibly Rep. Tiffany Bluemle)]: What about a circumstance in which a school decides they're gonna have some special kind of a field trip and it's not part of their budget? And they want all students to attend. They either can pay according to this, they could not charge students an additional amount in order to participate in this program. Those students have a fundraiser and raise the amount in order to do that? Or could a parent's group raise the funds in order for that to happen?

[Beth St. James (Office of Legislative Counsel)]: Let's look at the language specifically rather than the summary to see what's in

[Rep. Wayne Laroche (Member)]: there. I

[Beth St. James (Office of Legislative Counsel)]: can share my I'll share my screen. It's page 15, line five. Sharing my screen. So it prohibits such schools from requiring tuition or fees of any kind above the money they're bringing with them from the district, it's silent as to I would read requiring as it doesn't matter what the source of the funds are. You can't require students to come up with that money, regardless of whether it would be out of pocket or fundraising. That's how I read that.

[Unidentified committee member (possibly Rep. Tiffany Bluemle)]: So, that would eliminate a school attempting to do something that they had not already budgeted for, that wasn't already accounted for their tuition money coming in. I can't speak to how this would be executed in the field. I've received a lot of comments from people saying that that would mean certain extracurricular activities that students participate in and pay a fee for. So I'm going have

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Emily answer then, Lynn, if that is the pitcher.

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: I think there's a difference between the private fundraising that goes towards the student budget and the school requiring a fee of students. So if there's a field trip that is imagined that all of the students are getting together to fundraise for the field trip, if it's like a trip to France, none of that is requiring a fee of those children or those families. But I I think where it would be requiring a fee is if say, one youth was not able to participate in the fundraiser because of whatever else was going on in their life, and then that kid was either not able to go

[Julia Richter (Joint Fiscal Office)]: on the field trip or their parents had

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: to come up with the difference they would have raised in the fundraiser, right? And so for me, that's the difference between a fee that's being charged and the ability for folks to privately fundraise and give that to the school. One is what the school is requiring of the people outside of the building and the other is what people outside the building are offering the school.

[Unidentified committee member (possibly Rep. Tiffany Bluemle)]: I think there are certain sports programs in public schools that I'm aware of that charge a fee for the student experience at this point.

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: Some districts do that and some districts don't and that is what we are trying to get at here is we are consistent funding from district to district to meet students' needs, then tax payers are having consistent, remember we're gonna have one homestead rate all over the state. So tax payers have consistent taxes from district to district. Then why some families have to pay more for their students when they're paying the exact same taxes as the town next door. Because that to some degree is, you know, like that's

[Unidentified committee member (possibly Rep. Tiffany Bluemle)]: understand that, but

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: that's the exact

[Unidentified committee member (possibly Rep. Tiffany Bluemle)]: same taxes. And I

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: think in current practice, we have different tax rates from district to district. And so some districts make up the difference in funding through say charging fees for families and some districts cover those costs through taxes. But if all districts are already paying the same taxes, then why would it be sort of fair for some communities to be charging fees rather than not?

[Unidentified committee member (possibly Rep. Tiffany Bluemle)]: Whole district would have to figure out how to include those athletic fees within their base budget.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Which is more equal access for students, right? Because if you're charged a thousand dollars to play the football team for the uniforms and you can afford that for your kids, but I can't, my kid can't play unless I hold a bake sale or something. So it's unequal access. I mean, that's how I'm interpreting that.

[Unidentified committee member (possibly Rep. Tiffany Bluemle)]: It will be very difficult to figure out how to.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Hopefully the foundation formal is going

[Unidentified committee member (possibly Rep. Tiffany Bluemle)]: to be generous enough to come with certain things. That's why. Yeah.

[Rep. Eileen "Lynn" Dickinson (Member)]: We have a situation. There's always a couple of these situations. We have a situation where SkillsUSA, which is part of the CTE program, the students compete, and they do it at the end of the year. And then they would come to us in May, and there were 12 of them that could go to the national meeting and compete in St. Louis or someplace and a couple of faculty. It got to be sort of a bone of contention because they wanted the school to pay, or they had to go out and fundraise among the community or some such thing. And it was like, if this happens every year, why isn't this on the budget? I mean, there's a theory in funding that everything should be on the budget, and you shouldn't be doing this extra fundraising. If it's there, if you need it, you put it in. And when schools go from a little fundraising year and a little fundraiser, that becomes a big deal, especially if the budgets get down to defeat. The other thing that you have is that, again, athletics, jackets

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: for the

[Rep. Eileen "Lynn" Dickinson (Member)]: hockey team, the Skills US, you name it, They hit up every business in town, every other week, all the time, and it's extremely aggravating. But, you know, they won the state championship and they go to London to go to run or something, a race or something. So, there is value to having you in the budget upfront right away or not. And if it's not there, they can give car washes or something. They sell grapefruit. That's another one that teens do. They sell The point of it is that there is a theory, there is a point of view on this that is in conflict

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: with the schools. Right. Okay. So I think we understand whether we like it or not. Think we understand it. Yes. Okay. Thank you, Beth. Okay. And now, John and Beth, I know you all have to go to the house, Ed, right? For the next round, you'll be saying this in your sleep for months. Julia, who's been so patiently waiting, who I thought might be first and is now

[Unidentified committee member (possibly Rep. Tiffany Bluemle)]: going to be the last one.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Yeah. That cooled down. Happy hear all the questions, and this will be fast.

[Unidentified committee member (possibly Rep. Thomas Stevens)]: Way to see your support team leave. Yeah.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Good afternoon.

[Rep. Eileen "Lynn" Dickinson (Member)]: Oh, Julia, thank you for coming.

[Julia Richter (Joint Fiscal Office)]: Absolutely. Julia, Victor, joined Fiscal Office. I know that you've done a lot of talking about H-nine 55, so I can go through

[Beth St. James (Office of Legislative Counsel)]: it in whatever level of

[Julia Richter (Joint Fiscal Office)]: detail is helpful. There is the fiscal note that's on the committee page

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: in the meeting.

[Julia Richter (Joint Fiscal Office)]: And while everybody has left of the staff team, I do need to note that this really was a joint effort. And that while I'm presenting it, Ezra did a ton of work, as did others in the office.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: That's great. I know it's good that you all worked together well. So we appreciate that.

[Julia Richter (Joint Fiscal Office)]: So do you want me to go ahead and share my screen?

[Rep. Eileen "Lynn" Dickinson (Member)]: Sure. For the fiscal note?

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Yeah, and I think there'll be places where you can say the impact is in the future and we don't know what it is or whatever. 13 pages, right?

[Julia Richter (Joint Fiscal Office)]: Something like that. Yeah, it's pretty long. 13 pages. That 73 was longer of a fiscal note. Chair So Kornheiser did speak to this a little bit in the very beginning, but as you'll note in the fiscal note, the vast bulk of this bill takes place in fiscal years beyond 2027. A lot of it is contingent on a number of things happening. So the overall fiscal impact of this bill is unclear as impacts depend on outstanding policy decisions at both the state and local level. We do have in our section by section sort of where there are potential fiscal implications of each section. And I also do want to talk about this first paragraph under fiscal impact, which relates to the appropriations in the bill. So as Beth walked through, there are a few places in the Ways and Means Amendment that would change the uses of the Act 73 appropriations that were then amended in Section C103 of the budget. So you'll recall Section C103 changed that education transformation appropriation. So pulling some of it back from the agency and dedicating it for education transformation work. So this bill really adjust the uses of that appropriation and it includes one FY '27 appropriation from the general fund to JFO for that pre case study. And this is covered by that about 130,000 that you had on the bottom line as the big bill passed here.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: And presumably, somebody has let Senate appropriations know they don't have all that money to play with.

[Julia Richter (Joint Fiscal Office)]: If they decide to fund the they haven't seen that transformation bill yet. But yes, our budget team colleagues working in the Senate are very aware So of do you want me to just go through?

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Yeah, so let's just do the quick reminder of your nice table because that's stuff that's actually in C103. I think we really want to know what the appropriations are for the most part.

[Julia Richter (Joint Fiscal Office)]: Yep, absolutely. This first chunk of the table,

[Beth St. James (Office of Legislative Counsel)]: this is

[Julia Richter (Joint Fiscal Office)]: where the uses of section C103 have been changed. So this is reflecting how the uses have been refined. Section C103, we can pull up the language if that's helpful, was quite broad, just dedicated over 1,042,000.000 for this education transformation work. And so now H95 of five is saying of that section C 103. Here's how we are going to amend those uses. Section four of H nine fifty five. This is the CISA grant program. So this would amend actually two prior appropriations. So this would be funding for issuing grants to CISAs to assist with startup costs. And this would be funded by two existing appropriations and amending those uses. One is 30 thousand that was previously appropriated, the AOE. This is that section C103. And then the other is There was an FY '25, there was an appropriation to AOE for both these startup support grants. Forget the exact name of it. This bill changes the name of both these two, he says, but they're still the same. And so this is saying of that Ed Fund appropriation that was made, there's still 60,000 left of it. And so it will be dedicated for funding these grants. So that's section four. Section 17, this includes the remainder of those amended uses of section C103. So first is directing $210,000 to be funding to reimburse union school district study committees for incurred expenses. You'll recall these are those study committees that are meeting to recommend any proposed mergers. The next piece of section 17, this is amending those uses for 442,000 to be used for the study committee facilitators and administrative costs. So there will be eight facilitators for the study committees. So this is funding for hiring those eight facilitators. And then also there is one. BOCES now called CISA existing in Vermont, called the Vermont Learning Collaborative. Abbreviated as VTLC. And so because they're already up and running and they're going to be supporting with a lot of this work of getting these other CSATs up and running, they can keep up to 32,000 for incurred administrative costs associated with this section. Or would this work? Lastly, amending those uses in section C103 is directing 300,000 for funding to issue grants to assist with hiring CISA executive directors. So you recall that each CISA will have an executive director position.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: So if you want to look at our budget as introduced, section C103 starts on page 104 of H951. So if you want to actually see the language of what we had in there, which was much more general.

[Julia Richter (Joint Fiscal Office)]: Yeah, so I have it pulled up here.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: There you go.

[Julia Richter (Joint Fiscal Office)]: We're really looking at this piece that 1.4525 amendment Then see of awarding transition grants to school districts and CSAs to support the work required to transition. So this is that piece that we're saying, okay, it's very broad in the big bill. It hadn't been all sorted out yet. Now nine fifty five is taking that and saying, here's how it's actually going to be used.

[Rep. Wayne Laroche (Member)]: So the CISA that we have, I don't know if it's the right time to ask the question, but joint fiscal, you find that it didn't hurt the cost savings and did it add to the bureaucracy?

[Julia Richter (Joint Fiscal Office)]: So we can't speak to that. I did hear the question this morning in the Caucus of the Whole. I will say that it's really hard to analyze cost savings in our current financing system because all of these decisions are made at the local level and where efficiencies may be gained. There's then the question, okay, how are we going to put that money back into the budget and dedicate it to something else? Or are we going to cut our budget? So I would defer to your colleagues on house education who have heard a lot more testimonials.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: There was a presentation that the Vermont Learning Collaborative did to house education, and they gave some examples. I looked up the presentation. I don't know if we have it on our But they gave examples of where they actually saved money. And then as Julia said, the question is, as a school district, you can choose to reinvest that into your trip to Montreal or your football team or hiring another teacher for English language learning, or you can choose to say, we're going to reduce our budget and cut taxes.

[Rep. Wayne Laroche (Member)]: Right, so there's two things. One is if they hire additional staff in order to make it work, then of course you get all the ancillary costs that go along with more staff. If they netted a reduction so that you had extra money, did they spend it? And then the next question would be, should we say you can't spend it?

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Well, that's a whole different view. Because what's going happen is under the foundation formula, they're going get what they get. So go ahead.

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: Yeah, exactly. The foundation formula consistent funding throughout the state and so any funding from CSIS, any savings from CSIS, would help sort of make that foundation formula work for districts.

[Rep. Wayne Laroche (Member)]: So the run up is going to just roll into the transition, what's coming out of the transition?

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: It's one of the main transition mechanisms we have, really.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: There's not a big huge bureaucracy because there's not a lot of people running in the CISA. I mean, Vermont Bernie Collaborative, how many people are involved

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: in that, Emily? You They don't have map for me.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Okay. Go ahead.

[Rep. David Yacovone (Member)]: Good. Yeah. Dave? My how many executive directors are there? There's seven Six. He says they're new. So they're not are they

[Rep. Wayne Laroche (Member)]: part time, obviously? Is that

[Rep. David Yacovone (Member)]: 300,000 for six people?

[Rep. Eileen "Lynn" Dickinson (Member)]: Wait. Let me check. They're not paid much.

[John Gray (Office of Legislative Counsel)]: It's 6,000.

[Julia Richter (Joint Fiscal Office)]: And I think I would say that, yeah, so that would be to $650,000 and awarded to AOE to six of the CISOs outlined in this bill. And then it's a question back to Laroche's point of the fiscal impact of the CISOs. This is what we have here, The bottom of Section two, getting to why the fiscal impact is unclear. Now what what those executive directors are are paid if additional staff is hired, if there's other costs incurred, of course, that would be additional expenditures by the CSAs. And we also don't know how that would be offset or if it would be offset with savings.

[Rep. Wayne Laroche (Member)]: So has anybody looked at whether or not the existing administration of the district or whatever it is can't already do the task that the CISAs would be doing?

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: I have not looked at that. The idea is that, I mean, right now, districts aren't doing all the things that CSOs do. And the idea is that CSOs would do it more efficiently and effectively than districts the time. So can

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: we should reduce staff at the district level. Because right now we have how many business managers or how many And so if you have overseeing all of that and you need one of them, you don't need eight of them or 12 of them or whatever of them.

[Rep. Wayne Laroche (Member)]: It would be nice if we I went out on my way home on Friday and happened to stop at the local store and was immediately accosted by someone that is a paraeducator down in the high school in our area. And just started discussing this. She said, you need to go into the school. You need to see what's going on. That sounds good. Anyhow, so eventually she talked about the back end of the house, the administration part, she said, we used to have five, we get about 30 of them in there now.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: So this is an opportunity for reducing administrative

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: costs.

[Rep. Wayne Laroche (Member)]: I'm not sure we're going to get to it this way, but I agree with what needs to be taken care of.

[Unidentified committee member (possibly Rep. Tiffany Bluemle)]: Mark, I would just point out something from the approach of creation's point of view. We appropriated 1.45 to 500,000 and with these changes there is still a balance of 470,500 that would be part of that original appropriation to further transitional work. Yes, go ahead. There are tasks we asked the agency

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: of education to do that were attached to that original appropriation that we do still want them

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: to do. And so we don't have to name them on this

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: bill because we haven't changed them.

[Unidentified committee member (possibly Rep. Tiffany Bluemle)]: Well, there's the positions. There was an order of rated and about 550,000 for contract services.

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: There were some of the contracts that you're already getting put forward on are things that we still want to do. Were contracts that were requested in Act 73 and that are still going forward and we just don't need to make changes and so they're not left here.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: You don't to mention them again.

[Unidentified committee member (possibly Rep. Tiffany Bluemle)]: Does that mean that they've been spent or they've been accounted for?

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: Yes, some has been spent and some has been accounted for.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Of what we tried to get AOE to come and talk to us about during the budget.

[Unidentified committee member (possibly Rep. Tiffany Bluemle)]: Right, but in our budget we're saying there's 1.452 available. But it's specifically for these? Right, we're taking 982,000 of that 1.45 right here that we're highlighting. To me, meant that there's still a half $1,000,000 left

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: That in this AOE is going to be using. Yes, yes. It

[Unidentified committee member (possibly Rep. Tiffany Bluemle)]: has been delineated.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: No, because they did not delineate. Right.

[Julia Richter (Joint Fiscal Office)]: So I think to that point, the adjustment of uses in H nine fifty five is less than the appropriation that was amended in Section C 103. Yes, that's correct.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Dave, did you have a question?

[Rep. David Yacovone (Member)]: No, I'm still figuring it's part time executive director in six regions and my area is from Belvedere all the way down to Stockbridge, and part time person would be busy. But okay, trying to see if Yep, it's thank you.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Determined, This these dollar figures were determined in ways and means? In people world? House education. Education.

[Rep. Eileen "Lynn" Dickinson (Member)]: A great deal

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: of not getting customer. Yeah, so they, think they feel confident with that.

[Unidentified committee member (possibly Rep. Tiffany Bluemle)]: I'll mention thank you. Will add I don't think they it's not imagined that this would

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: be the sum the full amount that a CISO would spend it's that this is really about seed money and then districts are

[Rep. Wayne Laroche (Member)]: Gonna come up.

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: They would raise more money in the fee

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: for children often, in our education based.

[Rep. David Yacovone (Member)]: Yeah. Thank you.

[Julia Richter (Joint Fiscal Office)]: So that's the table about the amended uses for the proposed amended uses. And then the other piece, the only new appropriation in H95 is that $75,000 for the pre K

[Rep. Wayne Laroche (Member)]: contract. So

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: I don't know that you need to go through

[Unidentified committee member (possibly Rep. Tiffany Bluemle)]: all of this wonderful history.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: I'm just trying to think about what we need to know. We've talked about the grant startup program and senior chart. A lot of these things are sort of in the chart. The language changes we heard about from Beth Friday or today. Maybe just stop if you're thinking you need questions about Thomas. I have

[Rep. Wayne Laroche (Member)]: a question that I

[John Gray (Office of Legislative Counsel)]: want

[Rep. Wayne Laroche (Member)]: make

[John Gray (Office of Legislative Counsel)]: sure I understood. The leg the legacy debt aid, that was section 74 Yep. 61,000,000, which I think we heard would come from the Ed Funds. So the the legacy debt is currently that's currently in school budgets being paid out of education spending. So this isn't an increased amount. This is a shift to how that money's paid.

[Julia Richter (Joint Fiscal Office)]: Yes. That's correct. So the so section 74, the legacy debt aid program, That 61,000,000 is the best estimate of the maximum in a single year, the maximum total amount of the legacy debt aid. The funding source is outstanding. In age nine fifty five. That said, to your point, your understanding is accurate that under current law, we know that a district's education spending includes all of its debt service, interest and bond. So this would not if the policy decision is made that this is funded out of the education fund, then this would not increase the overall cost to the education fund. However, it would be a shift of where that cost is carried. That said, it's a shift in a new system where everything is shifting. So we really can't compare it to current state. Okay. Thank you. Wayne. So the total outstanding legacy debt for our entire school system, and I'm assuming that means capital construction and everything,

[Rep. Wayne Laroche (Member)]: 61,000,000.

[Beth St. James (Office of Legislative Counsel)]: In one year.

[Rep. Wayne Laroche (Member)]: It's not the total outstanding. It's years. Got twenty years bonded. I understand that exactly.

[Julia Richter (Joint Fiscal Office)]: And it's not going to be 61,000,000 and then just drop off in a single year, right? It's going to phase out over time. I think first phase up a little bit and then phase down.

[Rep. Wayne Laroche (Member)]: And maybe some higher years because with that capital graph Years way back when it was 50,000,060 million dollars But along the way between now and furthest twenty year out there are some close to $100,000,000 the amounts paid in some years is going to be closer to $100,000,000

[Julia Richter (Joint Fiscal Office)]: Perhaps you're referencing the treasurer's presentation. This is specific to the total debt that exists by school districts that was incurred prior to 12/31/2025. So it has a time constraint. And it's basically saying of all of the debt that was incurred prior to 12/31/2025, in one single year, what is the total maximum possible debt service, interest in principal? And that would be 61.

[Rep. Wayne Laroche (Member)]: And this is all bonded dollars? Is there a cash to raise to the family?

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: So, and it's not so 61 next year, it's as Julia said, 61 is the max, as it's sort of it's going to ramp up and then go back down again. This is the total amount of bond debt that Michael Gonnell and the bond bank put together for us in the total bond payments. Are about to raise the pension from him on our committee gauge.

[Rep. Wayne Laroche (Member)]: So in any given year, this has been the most, it can be less.

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: Yeah, this is anticipated to be the most of all of the damage taken on and is no more of that would be taken on under this language because there is that date in there.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Lynn?

[Rep. Eileen "Lynn" Dickinson (Member)]: What about, I think it's Woodstock that did this maybe a town meeting that's Yeah, the same vote.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: It was contingent.

[Julia Richter (Joint Fiscal Office)]: So Woodstock is not a good No,

[Rep. Eileen "Lynn" Dickinson (Member)]: it would be on its own separate

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: Their future debt, this is old debt. This is debt

[Rep. Eileen "Lynn" Dickinson (Member)]: that you

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: established as of last December. It's already gone by. Anything new

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: is that none of that they wouldn't actually bond until we create a school construction program. Would all

[Rep. Eileen "Lynn" Dickinson (Member)]: They would be covered under this whole big umbrella that we're creating here.

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: In the way future, maybe if their particular project actually fits within the guidelines of the school instruction.

[John Gray (Office of Legislative Counsel)]: Okay.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: So the bond vote was contingent on their end on a whole lot of other things. And then there's the whole contingent on whether they need to get a school construction. But it has nothing to

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: do with this number.

[Rep. Eileen "Lynn" Dickinson (Member)]: Except that, no, understand it doesn't, but I'm thinking in terms of my understanding, where the news reported it, is that they were trying to get it under the umbrella but they didn't make it. They didn't even come

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: close to me.

[Rep. Eileen "Lynn" Dickinson (Member)]: Okay, so they're going to be included in the Do

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: they have They haven't actually taken on that debt yet. They just voted to authorize it in the future if a bunch of other stuff happens that has not happened.

[Rep. Eileen "Lynn" Dickinson (Member)]: Okay, so I also want to clarify. If you had 12/25/2025 debt, that would have all been paid by anybody in the state anyway under the normal circumstances of the way the Ed Fund pays. And so this would be the same continuation of what it had. It doesn't change the Ed Fund responsibilities. I would say

[Julia Richter (Joint Fiscal Office)]: it doesn't change, assuming this is paid out of the Education Fund, it wouldn't change the Ed Fund responsibilities. The shift would be that under current law, yes, school debt is covered by all property taxpayers However, in the because our homestead property tax rates are based in part on the local spending of the district. Local district will have a proportionally higher homestead rates in addition to everybody's rates also being a bit higher to cover the debt. So it will be a shift at the local level in terms of the tax mechanisms. However, this would happen at the same time as

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: the

[Julia Richter (Joint Fiscal Office)]: foundation formula, which is doing away entirely with those locally adjusted rates. Right.

[Rep. Eileen "Lynn" Dickinson (Member)]: Okay. So it's part of the local budget now, correct? And then the money gets sent back and covers whatever it's going to cover? Yes. Thank you. So I'm just trying to go through this.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: A lot of this is not going to apply so much.

[Julia Richter (Joint Fiscal Office)]: Yeah, we can go through this quickly. I

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: don't know if there's anything.

[Julia Richter (Joint Fiscal Office)]: I do want to know, do you want me to just sort of go through and hit a few

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: of them? We do not need to do any one of these by end script. Was sort of skipping over into the 20s now. One

[Julia Richter (Joint Fiscal Office)]: piece I would flag is the study committees of expenses above the reimbursement grants exceed the reimbursement grants, and that would be covered by the member districts, which would then fall into school budgets, thus impacting property taxes, all else equal. We talked about the appropriation changes, talked about the contingencies, financing, data collection, a few of these data collection pieces. If it results in better data being collected, then it means that there are students who have not been counted under current law that should have been counted, which then would mean in the foundation formula, those districts where those students should have been counted and weren't being counted would receive more funds for those students. Special education funding, this is really language to be in compliance with federal maintenance of effort. You talked a lot about the tuition, prohibition, fee prohibition. You talked about budget approval. Rule making. You talked about all of this rulemaking. The rulemaking really will have a fiscal impact, of course, because it will impact how those dollars are distributed. However, we don't know what the rules will say, so we don't know the fiscal impact. Regional assessment districts, You know, big picture, if the changes increase the frequency of reappraisal, then additional costs may occur. There's also that piece in. Section 35, that would result in an increased cost to the state where

[Beth St. James (Office of Legislative Counsel)]: cost

[Julia Richter (Joint Fiscal Office)]: of the full reappraisal will be covered by the tax department. This would happen over multiple years. It would be spread over at least six years. The director of PVR will be identifying a schedule for doing so. And this won't kick in really until those regional assessment districts are up and running. I think like 2030, however, in FY '27, there were three forty, two eighty parcels that would have been used to calculate this cost and you'll

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: run 140,280.

[Julia Richter (Joint Fiscal Office)]: Yes, sorry. I'm tired of this. I get it. And the way that that payment is determined is it's a lesser of. So the commissioner of taxes estimates the full cost of that payment, that full cost of that reappraisal. And if that cost is less than $66 times every parcel, the Commissioner pays the lesser of. That $66 times that total parcels would be 22 and a half million. However, that wouldn't be paid in a single year. Would be over multiple years into the future. That's like the maximum over six years.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Right. So divided by six.

[Julia Richter (Joint Fiscal Office)]: And if these regional assessment districts increase efficiency, there could be savings. Again, we don't know. So it's really the regional assessment districts. Property classifications, of course, outstanding policy decisions here will depend on the impact of the property classifications. I would flag that outstanding, the multipliers that are associated with the different tax classifications, you know, how much those homestead pay in relation to non homestead in relation to the second homes.

[Rep. Wayne Laroche (Member)]: You want to keep going? I want to back up to something, if you want to

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: just When we finish and then we'll back up.

[Julia Richter (Joint Fiscal Office)]: I'm just trying to fly through highlights. The school construction, you spoke about this a lot. Depending on outstanding policy and funding decisions,

[Beth St. James (Office of Legislative Counsel)]: of course,

[Julia Richter (Joint Fiscal Office)]: fund, but all of that will depend on those outstanding policy decisions. Those positions in the AOE that you spoke about, those are not included in the FY '27, those budget. And this bill does not put them in the FY '27 budget. It directs AOE to come back with their budget request, identifying funding levels of those positions. A lot about school construction. This is that supplemental district spending piece. This is that piece where it's that amount that a district can vote to spend locally above all of the amount that they're getting from the probation formula. And there's that equalization mechanism to raise those funds. And school construction is not limited by that 5% cap that exists for other supplemental spending. So it wouldn't count. And the impact of the way that the supplemental district spending mechanism is set up. And this was established in Act 73 is there is a recapture mechanism. We don't need to go into great detail, but essentially the school districts that have that supplemental district spending. That supplemental district spending decision will only impact that school district's tax rate in that year. And then any amount that's recaptured by the state from the equalization mechanism will then be used in the following year to lower everybody's property taxes. And then the foundation formula transitions, John walked through this, these are really mostly just timing changes. And then we have another way of thinking about the effective date.

[Rep. Eileen "Lynn" Dickinson (Member)]: Put this chart together on the page? Yes.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Figuring out effective dates, I always

[Julia Richter (Joint Fiscal Office)]: I will say it was a soothing exercise.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Oh, Well, is soothing. All right. Wayne, you have a question.

[Rep. Wayne Laroche (Member)]: Going back to section 23, special education funds.

[Julia Richter (Joint Fiscal Office)]: Sorry, can you give me a page number?

[Rep. Wayne Laroche (Member)]: It's not. It's an episcopal. Okay. So I'm now on page six. Okay. And this is probably more from, it says, Section 23 would prohibit school districts from reducing staff, programs or funding, which would disproportionately affect students with disabilities. Who decides? Is that an opinion? Or is that some metrics? And my issue is we're spending an awful lot of money on special education and a lot of it is one on one. I have empathy for those kids, but then on the other hand, I also hear that they're disrupting classrooms in some cases. So we're bending over backwards to help them, but in other places we're saying, you can't give any extra money to your exemplary students to help them go further. So this is more of a policy discussion. I know we have to abide by federal law, but then do we have attorneys looking at that federal law to make sure that we know the wiggle room in that law?

[Julia Richter (Joint Fiscal Office)]: So I certainly will defer to Chair Kornheiser on the policy piece, and I'll defer to the lawyers looking at the maintenance of effort. I will say from a technical fiscal perspective, maintenance of effort is important so that the state can draw all of those total monies down.

[Rep. Wayne Laroche (Member)]: I have a problem with drawing down federal money just for the purpose of drawing down federal money if it's not being effectively used to promote the education and welfare of the kids in the state of Vietnam. Some people want all the money. We want all the money. And that there, I think, in and of itself can be a problem.

[Julia Richter (Joint Fiscal Office)]: So that's a policy choice. And I would say that to the extent that maintenance of effort is not met, there are if maintenance of effort is not met, then there are also next out year fiscal implications of looking back when there was special education funding that came into the state. If maintenance of effort was not met in that year, then there are sort of ripple effects of the state needing to cover those funds. As for the policy argument, that is so outside of my bailiwick. It's not reversible.

[Rep. Wayne Laroche (Member)]: Of course, the other issue is if there's less money, then maybe we don't need some of the staff that we've got.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Emily, if you want to say something about

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: I encourage you to there's a Long Association of Special Education something. It would be great to have a conversation with about that. And there's also a special education grant, agency of education that can talk to you about maintenance. It's not even just maintenance cover, it's also maintenance cover and maintenance of Fiscal support. Fiscal support and it's fairly not in the area of federal law though.

[Julia Richter (Joint Fiscal Office)]: We've got other people to talk about it.

[Rep. Wayne Laroche (Member)]: We couldn't add us a lot of time.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Yeah, absolutely. Sounds like it's a whole other project.

[Rep. Wayne Laroche (Member)]: All right, so Lynn. I have a question.

[Rep. Eileen "Lynn" Dickinson (Member)]: I think it's probably for Emily. This is a tax bill as much as it is an education bill. And I guess I'd like to have some justification, maybe it's the right word, of why we are going to go and increase taxes on second homes who do not use our schools, who actually help subsidize the property taxes for everybody else because they pay property taxes right now that are probably substantial. What's the logic behind trying to just I mean, almost looks punitive. So what's that for? Because I think they contributed I I've talked about this before. We have Ken Jones, who was an economist from the Economist Department, who did all that white paper stuff about how much they can determine from Visa. These people come in, they come in for a week, and then they come in and they spend a week, and then they go and they stay for a month, and then they buy a condo or a house or something. I mean, you can see that these are the potential future Limoners. Their children and their families come here. We make more than just the property taxes out there. Are we trying to drive them away? Are we trying to punish them? Are we trying to leave them dry? I I could go on and on.

[John Gray (Office of Legislative Counsel)]: You get the idea.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: So we've very strongly about this.

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: So this was a decision we made in Act 73 to set this in motion. And so the bulk of the debate about this happened last year. And this year, we've really been working very closely with the tax department to put

[Julia Richter (Joint Fiscal Office)]: in place some technical changes to make this happen.

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: One of the major concerns, particularly from the Senate about moving to a foundation formula, is that some districts who have been significantly underfunding schools, Sleigh Valley and Perry are my two favorite examples, because I have perhaps two districts on committee, concerned that while everyone agreed, administration included, that those districts needed more resources and that's why the foundation permit was a great idea, a real concern that bringing those districts' taxes up was unadvised, right? And so we hit upon this tax type as the best way to keep those districts homestead taxes as low as they are under current law. The justification for the second homes, I would say the bulk of our tax structure, whether that's our corporate income tax or personal income tax or our property tax structure, is really based around very explicitly an ability to pay. That's how the whole tax structure is built. And a second home is by definition owned by someone who has a greater ability to pay because they are holding greater wealth than someone who just took one home. And that's the sort of basic philosophical argument. I absolutely understand that there is lots of space to disagree on that.

[Rep. Eileen "Lynn" Dickinson (Member)]: That's why we increased the property transfer tax for certain Even though you should, you can't, it doesn't mean you should. That's the argument.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: So this is a

[Rep. Eileen "Lynn" Dickinson (Member)]: yeah. It's a full stop.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: It is. It is. So it's And

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: it's

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: a reminder that this conversation was what we had in Act 73, and we're not changing that. This is just putting into place the mechanism to make that all happen with the right dates and everything given

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: the

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: program we have.

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: I want to take the eightieth chance to just praise and appreciate the tax department and how incredibly collaborative, both technically and philosophically, they've been through this entire process. It's been a real pleasure to work with all this.

[Rep. Wayne Laroche (Member)]: Are

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: there any other questions? Is everybody pretty brained in? I am, but I Because we're gonna take a break and then we'll come back and vote. If you have another question, this is the time to ask I just wanted to

[Rep. Wayne Laroche (Member)]: make sure, I'll try

[Rep. David Yacovone (Member)]: to be quick. I wanted to ask the chair a question because I'm making assumptions in my mind. And so And and and I apologize for my back. The foundation formula, my understanding is, and I wanna be educated, but that be a cost contained tool, and it is likely to, for want of a better word, shift resources from school districts that spend a lot or more than the average to those that spend less and help equalize things. Is that accurate?

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: It's partially accurate. So and there's there are some assumptions in that that I wanna unpack a little bit. The foundation formula and the way it's calculated under act 73 is not designed to be an average. And so I think that's sort of something that's in the zeitgeist, but that's not how it's calculated. That's not how it's designed. It's really how much is needed to meet the educational outcomes that are needed. We have a whole lot of work to do next year as foundation formula is recalculated and as we add these surrounding grants to understand how much we're actually talking about delivering to each district. It will certainly be more for those districts that are significantly underfunded. It is not clear to me if it will be less for districts that are spending a lot or if it will be maybe a little less or a lot less. We really just don't know yet because there's still a lot to figure out. What I will say is the goal on the tax side and, for me, of the foundation formula is less about reducing spending and more about stabilizing spending so that year over year growth is predictable rather than totally and year over year taxes are predictable rather than sort of the stochastic situation we've been in up until now. I'm sorry for the ridiculous word. It was the one that came to mind.

[Rep. David Yacovone (Member)]: No. No. That's helpful. Thank you.

[Rep. Wayne Laroche (Member)]: Wayne? Just following up on that, we have personnel in all the different districts. It's not like we have them all in the state employee system where we have ranks and everybody on salary ranges. They're all over the place as far as I know, is that correct? So then is there any thinking? Maybe they all should be part of the state system.

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: Oh gosh. Yes. Lots of people talk about that.

[Rep. Wayne Laroche (Member)]: And that might solve some of the predictability problems.

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: Maybe, but that yes. It might. I don't know. It could also mean that there is this leveling up so that every teacher in the state got the salary of the highest paid teacher. There's a lot of unpredictability in that idea.

[Rep. Wayne Laroche (Member)]: They cut my salary years ago.

[Rep. Eileen "Lynn" Dickinson (Member)]: That's a problem even when you create these Yes. It is

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: one of the concerns about very large districts, yes.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: Yeah. When you have really large districts, that

[Rep. Emilie Kornheiser (Chair, House Ways and Means Committee)]: makes sense. It's also one of the opportunities in really large districts, depending on where you sit on that conversation.

[Rep. Eileen "Lynn" Dickinson (Member)]: Okay. I

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: think we've asked all our questions. Thank both for hanging out with us. You. I would like us to come back at 04:30 to vote.

[Rep. Wayne Laroche (Member)]: Are you

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: good on that?

[Scott Baker (Director of Debt Management, Office of the State Treasurer)]: I have to leave

[Rep. Wayne Laroche (Member)]: at 04:30 because there were three of us at the East. We'll just put me up there. Two of us are driving there.

[Rep. Robin Scheu (Chair, House Appropriations Committee)]: 04:20.